Employers need to be mindful that the exemption for PHEVs concluded on 31 March 2025 (refer to our previous article), after which a PHEV is no longer considered to be a zero or low emissions vehicle (ZLEC) for FBT purposes. Our earlier article reviewed the issues relevant to the provision of ZLECs.
Although the change to vehicles eligible for the exemption will not impact 2025 FBT returns, it is important for employers to understand this change in relation to the current 2026 FBT year commencing from 1 April 2025.
Transitional rules apply so as to continue the exemption for PHEVs that were eligible for the exemption prior to 1 April 2025. In order to continue to have access to the FBT exemption:
the use of the PHEV must have been exempt from FBT before 1 April 2025, and
there must be a ‘financially binding commitment’ to continue providing private use of the vehicle on or after 1 April 2025.This financial binding commitment must also remain in place, unaltered, beyond 1 April 2025.
Employers should take particular note of the requirement for use of the PHEV to be exempt before 1 April 2025, which acts to exclude PHEVs from the exemption if a PHEV is due to be delivered to an employee post-1 April 2025, despite a financially binding commitment being signed earlier. This is because the PHEV would not have been used or available for use by the employee before 1 April 2025.
Furthermore, we note that PHEVs that are part of a ‘pooled’ fleet will not qualify for the exemption, according to the recently updated website guidance released by the Australian Taxation Office (ATO).
The ATO finalised its Practical Compliance Guideline PCG 2024/2 last year, which provides a 'shortcut' method for valuing the cost of electricity when an EV is charged at an employee's or individual's home. The guideline allows employers to apply an EV home charging rate of 4.20 cents per kilometre, to calculate the cost of electricity when a vehicle is charged at an employee’s home. This applies to both calculating car expenses, from an income tax perspective, and operating costs, from an FBT perspective, when calculating the taxable value of car or residual fringe benefits.
Be aware, even if a vehicle is exempt, EVs remain reportable for Reportable Fringe Benefit Amount (RFBA) purposes.
For completeness, PCG 2024/2 does not apply to PHEVs and there is currently no approved ATO position for valuing electricity claims for PHEVs (although future guidance on the issue may follow given its topical nature).
Employers should also consider other FBT implications related to EVs, such as:
Car expenses – payments or reimbursements for car expenses (such as registration, insurance, repairs, maintenance, and fuel) are exempt from FBT if they are related to a car that is already provided as a car fringe benefit. This extends to electricity costs for EVs, where the EV being charged is provided as a car fringe benefit.
At-home charging equipment – If provided to or reimbursed for employees, this constitutes a separate taxable property, residual, or expense payment fringe benefit. It is not considered an exempt car expense.
Replacement batteries – If a replacement battery results in a substantial upgrade in performance, they are considered a capital expense. If they are the modern-day equivalent of the previous battery, the cost of the battery is classified as a car expense and exempt.
Charging stations at employer premises – The employee use of a charging station at the employer’s premises will be exempt where the EV being charged is provided to the employee as a car fringe benefit. Employers should monitor whether there are employees using a charging station who have not been provided with a car fringe benefit, since that employee’s use of the charging station will constitute a separate fringe benefit.
Employers who have vehicles in their fleet that do not constitute ‘cars’ (as defined) for FBT purposes (referred to as non-cars) – that is, a vehicle designed to carry a load of greater than one tonne or nine or more passengers, it is important to review the private usage of these vehicles before treating them as exempt from FBT.
As a reminder, non-cars are only exempt from FBT where their usage is limited to:
travel between home and work
travel that is incidental to travel in the course of employment duties, and
non-work-related use that is minor, infrequent and irregular.
The ATO has highlighted the treatment of non-cars as a key focus area for FBT compliance, specifically advising employers and tax advisors against applying exemptions without considering the level of private usage of the vehicles. Therefore, it remains as important as ever, for employers to analyse and substantiate the private usage of such non-cars within their fleet.
It is important to track the length of time a hire car is provided to an employee, and to review these arrangements when preparing the FBT return.
Where a hire car is provided to employees for their private use for a period of less than 12 weeks, a residual fringe benefit will arise. However, where an employee is provided the hire car for their private use for 12 weeks or more, a car fringe benefit will arise.
As the valuation methods are vastly different between the two outcomes above, employers will require different information, and the administrative burden may be greater when the length of time extends past the 12-week mark. The earlier you are made aware of these arrangements and determine the FBT treatment, the easier it will be for hire benefits to be managed at FBT year-end – and the less likely you will be to mis-classify them.
We summarise below some final recommendations for employers reviewing car and vehicle related benefits relevant for 2025 FBT compliance:
Novated lease provider information: Verify the accuracy of information from your novated lease provider, including base value and days available for private use, and ensure these details are supported by correct documentation (e.g. payroll records, tax invoices, closing odometer readings, etc.). Ensure the goods and services tax (GST) is included in the base value and stamp duty is excluded.
Base value reduction: A reminder that, if you are using the statutory formula method, the base value for cars owned or leased by employers for more than four years (i.e. before 1 April 2020) can be reduced by one-third.
Post-tax employee contributions: Review post-tax employee contributions to identify any excess contributions from prior years that were not refunded and can be applied to this year's car fringe benefits.
Statutory formula days unavailable for private use: If you are using the statutory formula method, the days that a car is unavailable for private use will still include the time when an employer has custody or control over the car, regardless of whether the car is being used.
Logbooks: Ensure that employee logbooks are valid to apply the business-use percentage when calculating the taxable value of a car fringe benefit under the operating cost method. For logbooks to be considered valid, the following requirements need to be met:
each logbook must be kept for a continuous 12-week period (which is representative of the travel patterns of the vehicle for the period in which the logbook will be relied upon)
a new logbook is required to be prepared every five years, and
at a minimum, the logbook must include the following details for each business trip – the date the trip began and ended, the odometer reading at the start and end of the trip, the number of kilometres travelled, and a sufficient description of the purpose of the journey (e.g. whether the travel was private or business-related).
For further information, please don’t hesitate to contact one of our Employment Taxes specialists or refer to the following articles on the PwC employment taxes website.
There are many nuances between business travel, living away from home, and relocation, and the distinction can result in differing FBT treatment for travel benefits provided.
With employers continually focusing on a more contemporary and competitive Employee Value Proposition (EVP), we are seeing the provisions of more varied benefits – and in particular non-cash gifts, awards and incentives – being provided to employees as part of their overall employment package.
As the 2025 Fringe Benefits Tax (FBT) compliance period approaches, it is key for employers to familiarise (or re-familiarise) themselves with the often overlooked residual benefits category, which operates to capture fringe benefits which are not captured by other categories of benefit.
As we approach the end of the 2025 Fringe Benefit Tax (FBT) year, it will soon be time for employers to turn their minds to the annual FBT return preparation process and establish a game plan to set up for success.
