Electric vehicles (EV) cars are set to become a lot more affordable if the ALP’s promised EV policy comes in to effect from 1 July 2022 as promised in the lead up to the May 2022 election.
In addition to an import tariff discount of 5%, the policy makes EV’s cost less than the luxury car tax (LCT) threshold for fuel efficient vehicles (which increases to $84,916 from 1 July 2022) exempt from Fringe Benefits Tax. If you’re wondering what EV you might be able to buy, Transport for NSW maintains a list of EV’s that are available in Australia on their website here.
Although the FBT exemption applies to cars that cost less than the LCT, the Depreciation Cost Limit (DCL) still applies to limit depreciation deductions for cars. The DCL is set to increase to $64,741 from 1 July 2022 (up from $60,733 in FY22). Temporary full expensing continues to be available to most businesses until 30 June 2023 for cars costing up to the DCL.
If the EV policy is implemented, it would effectively mean that EV’s costing up to $64,741 that are acquired between 1 July 2022 and 30 June 2023 would be fully deductible in the year of purchase and, if provided to employees, would also be FBT free.
For comparative purposes, a non-electric car purchased for the same price would incur an estimated FBT of $12,659 annually.
EV’s that cost between $64,741 and $84,916 would also be exempt from FBT, but the depreciation deduction would be limited to the DCL.
It’s important to keep in mind that, at this stage, the FBT exemption is just a policy announcement and has not been legislated. However, if you’re planning a new vehicle purchase and an EV is of interest to you, it might pay to keep an eye out for news on the progress of this policy before you make a decision.
As always, if you have any queries in relation to this please discuss with your client manager here at Kreston Stanley Williamson.
Author – Darren O’Malley
*Correct as of 21 June 2022
*Disclaimer – this article has been produced by Kreston Stanley Williamson as a service to its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas contained in this article, it is imperative you seek specific advice relating to your particular circumstances. Liability limited by a scheme approved under professional standards legislation.
