SALARY PACKAGING FOR EMPLOYEES

I wrote earlier this year about the tax concessions for businesses purchasing electric vehicles. Over the last few weeks, we have had several enquiries from business owners and employees about purchasing an electric vehicle and salary packaging.

To recap the conditions:

From 1 July 2022, electric and plug-in hybrid vehicles became exempt from FBT in Australia, where broadly the following conditions are met:

  • The car is a zero or low emissions vehicle’, being a battery electric, hydrogen fuel cell or plug-in hybrid car,
  • The car is used by a current employee or their associate,
  • The value of the car at the first retail sale was below the Luxury Car Tax threshold for fuel-efficient vehicles (which is $89,332 for the 2023-24 year), and
  • The car is both first held and used on or after 1 July 2022.

It is important to note that for plug-in hybrids, the exemption will be available only until 31 March 2025 unless the taxpayer maintains a pre-existing commitment.

Given there is no FBT cost in providing electric vehicles to employees, salary packaging could provide a substantial tax benefit for employees.

Employers may be faced with employees asking the question as it seems to be the discussion for employees of both large and small employers. It could be the difference of holding onto employees.

Below is an example of a Novated Lease for an electric vehicle

 Novated LeaseCar Loan
Vehicle driveaway price$68,301$68,301
GST Saving-$6,109$0
Weekly running costs$221$370
Annual Income Tax Saving$6,084$0
Residual Value$19,243N/A
Total cost over 5 years to own car$77,007$101,723
Difference-$24,715N/A
  • The above is a hypothetical example.

As you can see from an employee point of view a significant saving can be made.

If you have any questions regarding the budget and its impact to you, please contact Mark or the team at mark@mcaccg.com.au or 9923 2959.

This is general advice only and not to be interpreted as individual advice specific to your situation. Contact us to discuss the best solutions for your needs.”