As more and more people choose to salary package an electric vehicle, we thought we’d create a short post with answers to our most commonly received questions. Need your question answered? Please let us know!

If I get an electric vehicle under a novated lease, are all the payments pre-tax?

Yep, in most cases, that is correct! This is thanks to the electric cars exemption, which was introduced in July 2022. There are some restrictions, but broadly speaking, the lease payments (plus all associated running costs) can be made entirely in pre-tax dollars. There is no need to reduce the $15,900 salary packaging amount for other living costs, nor are post-tax contributions required.

As the exemption has been in place for a little while now, and given the increasing popularity of electric cars, we are starting to see more and more members take up the option.

Hang on – what do you mean by running costs?

Not only are the lease (finance) payments included, but all associated running costs too. That means registration, servicing, tyres, insurance, car washes and so on. By bundling all costs together, the entire operating costs of the car can be paid in pre-tax dollars.

Can the exemption be applied to any electric or hybrid car?

Plug-in hybrids are no longer eligible for the exemption. That door closed on 31 March 2024. Existing arrangements were ‘grandfathered’ and those cars will continue to qualify for the life of the lease.

Electric cars qualify for the exemption, as long as the purchase price falls under the luxury car tax threshold. In other words, if luxury car tax was ever paid on the vehicle, it isn’t eligible for the exemption.

Is this thing going to last forever?

No one knows for certain, but the ATO’s information states that the electric car exemption will be reviewed by mid-2027.

Is any FBT payable on an electric car?

Again, subject to the conditions above, no FBT is payable. For full-FBT paying companies, this means that no FBT is payable on the grossed-up taxable values of qualifying electric cars.

Further, this applies to FBT rebateable and FBT exempt employers. Not only is there zero FBT payable, the $15,900 ($30,000 grossed-up) threshold limits do not need to be reduced to accommodate any taxable values relating to the cars.

Are the cars reported on the income statements?

Yes! This is sometimes overlooked. Even though no FBT is payable thanks to the exemption, the reportable fringe benefits are still reportable. So, an employee who salary packages a qualifying electric vehicle will have a reportable fringe benefits figure shown at tax time.

This is important to note, as reportable fringe benefits can have an impact on means-tested government calculations, such as those for HELP/HECS repayments, child support, and the Medicare levy surcharge.

Want to learn more?

The team at GO Salary is happy to answer your further questions. We can even post them here! Please email [email protected] and we’ll answer them.