The Government is moving ahead with changes to the FBT exemption for electric vehicles, with legislation now before Parliament to implement the changes announced earlier this year. The concessions available for new EV arrangements will gradually reduce from 1 April 2027, but importantly, the changes are designed not to disturb existing eligible arrangements entered into before the relevant dates.
What’s changing?
The current full FBT exemption for eligible electric cars is proposed to gradually move to a discounted FBT model. There are essentially three periods:
Before 1 April 2027
Eligible EVs provided under commitments made before this date will continue to receive the existing FBT exemption until the relevant commitment ceases.
1 April 2027 to 31 March 2029
For new commitments during this period, eligible EVs with a base value of $75,000 or less can receive a 100% FBT discount. Those with a base value above $75,000 but within the applicable fuel-efficient car limit can receive a 25% discount.
From 1 April 2029
For new commitments from this date, only the 25% FBT discount will remain available for eligible EVs within the applicable fuel-efficient car limit
Why existing commitments matter
For anyone who already has an eligible EV arrangement in place, this is probably the most important part of the proposed legislation.
The intention is not to retrospectively remove the FBT concession from existing eligible commitments. An eligible EV provided under a commitment made before 1 April 2027 can retain its existing exemption until that commitment ceases. Similarly, qualifying arrangements entered into during the transitional 1 April 2027 to 31 March 2029 period can retain their relevant 100% discount beyond 1 April 2029 until the commitment ceases.
However, care will be needed when an arrangement changes.
The explanatory memorandum says a new commitment can arise where, for example, the vehicle is refinanced, lease terms or the residual value are altered, certain accessories are added and increase the lease payments, or the employee changes employers.
That distinction could be important for people considering refinancing or changing an existing novated lease.
What should you do?
If you already have an eligible EV arrangement in place, the proposed transitional rules are designed to preserve its existing FBT treatment. However, before refinancing, varying or replacing an existing arrangement, it is important to check whether the change could create a new commitment, as this may affect the FBT concession available.
If a new EV or salary packaging arrangement is on your radar, now is a good time to understand how the proposed changes could affect you. With new FBT rules proposed to apply to commitments made from 1 April 2027, when you enter into an arrangement could make a difference to the concession available. Mission Advisory can help you work through the rules and understand the practical implications before you make a commitment. Contact us today to discuss your options.
These proposed changes are not yet law and remain subject to the parliamentary process. We will continue to monitor developments as the rules are finalised.