Outright purchase of EV towards FBT exemption from company I have equity

(Newbie)Newbie

25 Feb 2024

I am a director, shareholder and employee of a small business (registered company).

I would like to take advantage of the EV FBT exemption and have some questions about the proposed course of action:

Have the company purchase an EV car
Come to agreement with other directors/shareholders over appropriate salary sacrifice
Provide it to myself for personal use, but still owned by company
Make use of the FBT EV exemption (understanding that I as an employee willl still have a Reportable Fringe Benefit Amount)
(optional) Eventually sell the car to myself or to an unrelated third party
1. This would be an desired option that is kept open on the understanding that the EV FBT exemption may end (e.g. mid-2027 overall review, PHEV exemption ending 31 March 2025, maybe earlier)

What I would like to know is:

A. Given this deviates from the vast literature out there which seems to relate to novated leases, can I confirm that a car purchased outright by a company and then provided to employee is still covered by the FBT exemption?

B. The potential of a Division 7A and FBT overlap is discussed here - the wording appears to be that if the 'payment' is made in my capacity as an employee then it would not be Division 7A. However it is unclear who determines that and how. Is there any further information on this?

C. Regarding #2 - is an agreement with business partners sufficient (in principle, just assuring that others are not out of pocket) or do additional restrictions apply here (e.g. some arms length market value measure)?

D. Regarding #5 - is it allowed to sell this to myself? And if so, is it sufficient to do so on a market value or depreciated value basis and have the company make a balancing adjustment as necessary, or do additional restrictions apply?

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Most helpful reply

AriATO

(Community Support)Community Support

29 Feb 2024

Hi @LedgerBadger

A. We can't say if the employee is covered by the exemption because it depends if the criteria for the EV exemption is met. If you're asking if FBT applies to that scenario the answer is yes, if the car is made available to the employee to use privately.

B. The company would need to demonstrate this. If they want us to assess a particular scenario and rule on it we can do that too. The company can apply to us for tailored technical assistance for further advice about this.

C. A salary sacrifice arrangement is between an employer and employee, we can't advise how a company/employer would need to agree to one. What we can tell you is that it needs to be what we call an effective salary sacrifice arrangement and that's explained in this link.

D. We don't have any rules that prevents a company selling a vehicle to a director/shareholder/employee. To make sure it's done correctly the company should get professional advice or advice from us using the same link I gave at B.