The latest Carbon Dioxide Emissions Intensity for New Australian Light Vehicles Report for 2021 shows the carbon emissions intensity of new light vehicles sold in Australia fell by 2% in 2021. The report states that increased sales of SUVs and utes in Australia are counteracting the increased sales of electric and hybrid vehicles and in turn diminishing Australia’s overall improvement in reducing personal transport emissions.
To encourage more businesses to switch to zero and low emission vehicles, the Australian Government has recently passed the Treasury Laws Amendment (Electric Car Discount Bill) 2022 through the Federal Parliament. The Bill removes import tariffs for zero and low emission vehicles which are beneath the Luxury Car Tax Threshold ($84,916), and makes these vehicles exempt from Fringe Benefits Tax.
The tariff rate for imported motor vehicles is projected to remain at 5.0% over 2022. This rate applies to imports from all nations, except those for which a free trade agreement (FTA) is in effect. Australia’s major sources of imported motor vehicles include Japan, Thailand, the United States, South Korea and China and we have FTAs with each of these countries. As such there are already no import tariffs on motor vehicles from these countries, meaning the impact of the new Electric Car Discount Bill is null.
The second component of the bill will make zero and low emission vehicles more attractive for employers to purchase and in turn lead to more second-hand vehicles being available in the vehicle market. Fringe Benefits Tax (FBT) is paid by employers, currently at a rate of 47% on the taxable value, and only applies to the private use of vehicles that are supplied by the employer to employees. To calculate FBT using the statutory formula method a single statutory rate of 20% is used as the private use percentage.
The following formula to calculate the taxable value of car fringe benefits under the statutory formula method:
Taxable value = ((A × B × C) ÷ D) – E
Where:
A = the base value of the car
B = the applicable statutory percentage
C = the number of days in the FBT year when the car was used or available for private use of employees
D = the number of days in the FBT year
E = the employee contribution.
Using $80,000 as the base value of the car for example, 365 days for C and D and $0 for E, this would save an employer approximately $7,500 per year in FBT on the provision of a vehicle to an employee, a not insignificant amount of money, especially if the employer has a large fleet. Combine these savings with the lower costs because of less fuel usage and this could be a significant benefit for a company’s bottom line.
But another tax consideration is how an employer will account/compensate for the electricity charges that an employee will incur at home from charging their electric vehicle. Driven Women Magazine approached the Australian Taxation Office (ATO) regarding this and a Spokesperson responded:
“The ATO recognises that there are challenges in calculating the costs when electric vehicles are charged at a home, and are in the process of developing a practical compliance guideline (PCG) which will provide advice on how to calculate an approximate cost of charging an electric vehicle. You [the electric vehicle owner] should retain records to assist in determining any costs incurred such as receipts of actual expenditure, odometer records and or a valid logbook. This PCG is expected to be completed by March 2023.”
Chief Executive of the Federal Chamber of Automotive Industries, Tony Weber said that financial incentives such as these are an important part of the policy framework that will be required to increase the uptake of zero and low emission vehicles in Australia.
“Car makers support financial incentives as part of a wider range of policy measures, Mr Weber said. This is an important step that complements the Government’s plan to develop an electric vehicle strategy and the current review into fuel quality,” Mr Weber said.
A December 2022 report into Australia’s emissions projections states electricity consumption of EVs will be 3% of the National Electricity Market by 2035. Less emission intensive vehicles are just one of the strategies needed to help reduce the greenhouse gas emissions from Australia’s personal transport sector. Other options that Governments can focus on include improved public transport, cycling or walking.
Photographs by Driven Women Magazine.