Upcoming FBT-related changes

With 2023 in full swing, the ATO is looking to finalise a number of FBT-related issues currently under consultation.

For businesses, the outcome of these consultations and subsequent issue of draft rulings or guidelines may affect the applicability of FBT in certain circumstances, as well as the calculation of FBT benefits.

The ATO continuing its work on the updated car parking fringe benefits as a result of the Full Federal Court’s decision in FCT v Virgin Australia Regional Airlines Pty Ltd [2021] FCAFC 209.

An addendum is planned for release in February, following consultation of the draft update which was released in November 2022. An update to Chapter 16 of FBT – a guide for employers is also planned to be completed in April 2023.

This update will incorporate practical guidance on the application of the car parking FBT law, including the meanings of “commercial parking station” and “primary place of employment”, and should be read in conjunction with the aforementioned updated ruling.

A new area that the ATO is working on is the issuance of a draft practical compliance guideline for calculating electricity costs when charging an electronic vehicle at an individual’s home for FBT purposes.

According to the ATO, this draft guideline will provide a methodology to enable users of electric vehicles to determine the approximate cost for the electricity when charging an electric vehicle at home.

It is expected to be released soon (sometime in February). While this new draft practical compliance guideline will not currently apply to those electric vehicles both held and used on or after 1 July 2022 and meets the other conditions for exemption from FBT (ie under the LCT threshold, and a zero or low emissions vehicle), it will be helpful for those vehicles that do not meet the conditions for FBT exemption and for reportable fringe benefits amount purposes.

For an eligible vehicle that is exempt from FBT, car expenses such as registration, insurance, repairs/maintenance, and fuel (including electricity to charge and run electric cars) are also exempt.

However, it should be noted that the provision of a home charging station is not a car expense associated with providing a car fringe benefit and may be a property or an expense payment fringe benefit.

Although the private use of an eligible vehicle and associated expenses are exempt, businesses are still required to include the value of the benefit when working out whether an employee has a reportable fringe benefits amount.

This entails working out the notional taxable value of the benefits, which under both the statutory and operating cost method is reduced for any employee contributions made.

For employees that charge electric vehicles at their homes, the new draft practical compliance guideline will hopefully provide an easier method for working out their contribution and reduce the taxable value of benefits for reportable fringe benefits amount purposes.

It may also be useful in the future for all zero or low-emission vehicles as the government has committed to a complete review into the FBT exemption by mid-2027 to consider electric car take up which may result in the FBT exemption being removed.