Luxury Car Limits for Electric Vehicles (EVs) under Fringe Benefits Tax (FBT) in 2024

Fringe Benefits Tax (FBT) is a tax imposed on non-cash benefits provided to employees, which are not considered part of their salary. For employers, this includes the provision of luxury cars, among other items. This tax is designed to cover the value of benefits received by employees, including those who use luxury vehicles for personal use.

Luxury Cars and FBT Limits

In recent years, electric vehicles (EVs) have been increasingly popular due to their environmental benefits and advancements in technology. However, the FBT limits for luxury cars still apply, and understanding these limits is crucial for both employers and employees to avoid unexpected tax liabilities.

2024 FBT Limitations for EVs

For the year 2024, the FBT regulations have specific limits concerning luxury cars, including electric vehicles. These limits determine how much of the cost of a luxury EV can be claimed as a tax deduction or what amount is subject to FBT.

The Australian Taxation Office (ATO) defines a luxury car as one with a cost exceeding a certain threshold. For 2024, this threshold is set at AUD 79,659. However, for electric vehicles, there are some variations and exceptions.

Luxury Car Tax Thresholds

The luxury car tax (LCT) threshold is an important figure in determining whether a vehicle is classified as luxury and how much tax is applicable. For 2024, the LCT threshold is AUD 84,916. Cars priced above this amount are subject to a luxury car tax of 33% on the amount exceeding the threshold.

FBT and EVs

Electric vehicles, despite their higher purchase price, benefit from certain incentives and exemptions. Under current regulations, there may be discounts or incentives that affect the taxable value of EVs. Employers providing electric vehicles may benefit from reduced FBT liabilities due to these incentives.

Example Case Study

To illustrate how FBT works for luxury EVs, consider an example where an employer provides an employee with a luxury EV valued at AUD 90,000. The FBT calculation would involve determining the taxable value of the vehicle, which is above the luxury car tax threshold.

1. Calculate the Excess Amount: AUD 90,000 - AUD 84,916 = AUD 5,084
2. Apply the LCT Rate: AUD 5,084 x 33% = AUD 1,680.72

The LCT payable on the vehicle would be AUD 1,680.72.

Additionally, for FBT purposes, the employer must consider the fringe benefit value and apply any applicable reductions or exemptions related to EVs.

FBT Calculation Example

To understand how FBT is calculated for a luxury EV, we consider the following example:

• Vehicle Cost: AUD 90,000
• FBT Rate: 47% (standard rate for FBT in 2024)
• Fringe Benefit Value: AUD 90,000

Calculation:

1. Determine the Taxable Value: In some cases, the taxable value may be adjusted based on usage and other factors. For simplicity, assume the entire vehicle cost is subject to FBT.
2. Calculate FBT Payable: AUD 90,000 x 47% = AUD 42,300

Thus, the FBT payable would be AUD 42,300.

Impact of EV Incentives

Government incentives for electric vehicles can significantly impact the FBT liability. For instance, subsidies and tax credits for EVs can lower the taxable value of the vehicle, thus reducing the FBT payable. Employers should stay updated on any changes to these incentives to maximize their benefits.

Strategies for Managing FBT on Luxury EVs

1. Utilize EV Incentives: Ensure that any applicable incentives or subsidies are utilized to reduce the taxable value of the vehicle.
2. Track Usage: Keep detailed records of vehicle usage to accurately determine the proportion of personal vs. business use.
3. Consult Tax Professionals: Given the complexities involved, consulting with tax professionals can help navigate the regulations and optimize FBT outcomes.

Summary

Navigating the Fringe Benefits Tax (FBT) for luxury electric vehicles in 2024 requires an understanding of the current limits, thresholds, and applicable incentives. By being aware of these factors, employers and employees can effectively manage their FBT liabilities and take advantage of potential savings. Keeping abreast of changes in regulations and consulting with professionals ensures compliance and optimal tax management.