I have the same question, and there seems to be a grey area for electric car leases. The spirit of the new FBT exemption for electric cars up to the Luxury Car Tax (LCT) is to encourage uptake of electric cars up to the LCT, and to be able to take out a novated lease without any FBT.
However, even if an electric car is under the LCT and therefore eligible for the waiver of FBT, if the car is above the car limit (which is different to the LCT) of about $64,000, you can't take out a novated lease.
I bought a new Tesla for $83000 (under the LCT) and is therefore eligible for the FBT waiver. However, I can't utilise a novated lease to take advantage of that waiver, because the car is above the car limit of $64000.
There is like a black hole for electric cars between $64000 and $84000.
Wiil the ATO allow the novated lease of electric cars between $64000 and $84000?
There are lots and lot and lots of people who are, in all good faith, buying electric cars worth around $80000, assuming that they can take advantage of the Government's new policy of waiving the FBT for electric cars.
So this will become a very common question.
Thank you.
Author: AriATO(Community Support)Community Support 21 Mar 2023
Hi @ShreyasDoshi and @Common_Sense_M
When an employer leases a car to their employee for private use it's a fringe benefit. This is usually done as a novated lease through a salary sacrifice arrangement. It's up to them to decide what benefits they offer under a salary sacrifice arrangement and the amounts. There aren't any restrictions for what they can offer as long as its what we call an effective salary sacrifice arrangement.
When you claim depreciation for a car, you can't deduct the full amount that was paid if it's above the car limit. This applies to all businesses. If a car cost $80,000, the most a business can claim is the car limit.
The luxury car adjustment sounds like it's the difference between the actual costs the employer's incurred and the deductions they're eligible to claim due to the car limit. I'm not familiar with how the employee pays the LCA. If it's classed as a fringe benefit, employers can claim the cost of providing fringe benefits as an expense.
Is there any more information available on this topic?
I've fought like crazy to keep a car price below the EV FBT Threshold, only to find there is still a Luxury Car Adjustment charge.
If there is no FBT, what cost is there to the employer? I'm leasing an EV costing $89,000, under the EV LCT Threshold, therefore no FBT, so no cost to the business and no need for after-tax contributions. So why a $56.06pm pre-tax "Luxury Car adjustment"?
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