It is now far more affordable to salary package an electric vehicle.
The cost difference between electric and petrol/diesel vehicles has been a major factor in Australia’s slow adoption of electric vehicles.
The Federal Government introduced legislation in July 2022 to significantly reduce the cost of electric vehicles for Australians.
Employers who allow current employees to use vehicles they own for private use, and/or assist their employees to purchase a vehicle through salary sacrifice, are eligible for the scheme.
Salary packaging electric vehicles - What has changed?
The federal government’s initiative included two major changes aimed at increasing the take-up of electric vehicles:
The federal government’s initiative included two major changes aimed at increasing the take-up of electric vehicles:
- Removal of the Fringe Benefits Tax (47%) on qualifying battery electric, plugin electric, and hydrogen fuel cell cars costing less than the luxury car threshold of $84,916
- Elimination of the 5% import tariff for the same type of vehicles
Removal of the Fringe Benefits Tax and Import Duty significantly reduces the cost of qualifying electric, and hydrogen fuel cell vehicles.
Benefits of salary packaging an electric vehicle
With these changes, if you salary sacrifice a qualifying electric vehicle:
- The cost is significantly reduced because you are not paying Fringe Benefits Tax or Import Duty
- You pay for the vehicle lease with pre-tax income – which reduces your taxable income
- The amount you finance does not include GST (On a car worth $70,000, this represents a saving of $6,363)
How much will salary packaging save?
When the government announced the programme, they estimated on a qualifying vehicle worth $50,000:
- Employers will save up to $9,000 per year
- And employees using salary sacrifice, $4,700 per year!
These savings would be greater on more expensive vehicles. (Most electric vehicles currently available in Australia cost considerably more than $50,000)
The amount you will actually save is determined by:
- The cost of the vehicle
- Your income
These changes mean the cost of a salary packaged electric vehicle would now be close to, or even less than, a comparable non-electric equivalent.
How do I salary package an electric vehicle?
You can salary package an electric Vehicle by using what is known as a Novated Lease.
A Novated Lease is a 3-way agreement between an employer, employee, and a Lender.
Under a Novated Lease:
If the employee leaves the business, they become responsible for the loan.
Summary
The federal government launched this initiative to:
- Address the cost disparity between petrol/diesel and electric vehicles
- And through this, encourage the take up of electric vehicles
Whilst supply constraints mean the lead times involved in accessing vehicles are currently lengthy – hopefully this will moderate over the coming year.
If you are interested in salary packaging an electric vehicle and would like a highly competitive quote – don’t hesitate to get in touch.
