Author: Ellaz(Initiate)Initiate 13 Oct 2023
Refer to Electric vehicles and fringe benefits tax for background...
Link: https://www.ato.gov.au/law/view/document?docid=AFS/EV-FBT/00001
According to Key point 6: If the use of the car and the associated car expenses are provided under a salary sacrifice arrangement, the exemption can still apply.
I'm trying to determine if I qualify for the EV FBT exemption. Does a vehicle financed by a personal loan (on employee's name) qualify?
The employer is a charitable organisation with PBI status so exempted from FBT for up to $30,000 gross-up amount. It currently offers In-House salary sacrificing arrangement for general expenses and meal entertainment to all its employees, i.e. pre-tax deduction for home loan, rent or student tuition fee. Can this be extended to salary sacrificing for an EV through finance (not a novated lease and no 3rd party lessor involved) and would the FBT exemption still apply?
Please note that this is not a leasing arrangement. The car loan will be taken out in the employee's name, not the employer.
thanks in advance for your help.
regards,
Ella
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4 replies
Author: Colin123(Newbie)Registered Tax Professional 26 Oct 2023
I believe the answer is no, and it comes down to the nature of the benefit that is being provided by the employer.
Technically the lease company owns the vehicle in the case of a lease (despite the vehicle being registered to the employee), and simply allows the lessee to use the vehicle in exchange for paying the lease payment. Under a novated lease agreement, the lease payments are considered an expense, and the novation places the obligation to pay the lease payment on the employer while the employee is employed. So the employer has an obligation to pay the expense and the employee agrees for this to be deducted from their salary.
In your example, the employee owns the vehicle, purchased with funds from a loan. If the employee salary sacrifices the loan repayments, the benefit provided by the employer is not a motor vehicle fringe benefit. So the salary sacrifice arrangement is not an "EV FBT exempt" benefit.
The benefit provided by the employer would instead be the same a "pre-tax deduction for home loan", which is a "residual benefit" and would be subject to FBT if the $30K capped it exceeded.
