The Australian Taxation Office (ATO) has released new information on electric vehicles just in time for the start of the Fringe Benefits Tax (FBT) year that started on 1 April.
The FBT Exemption for Electric Cars
The FBT exemption for electric cars applies if your employer provides you with a zero or low-emissions vehicle. From 1 July 2022, this exemption can be applied to the employer, irrespective of whether the benefit is provided in connection with a salary sacrifice arrangement or not. Typically, the FBT exemption should apply where:
- The worth of the car is less than the luxury car tax threshold for vehicles that are fuel-efficient ($84,916 for 2022-23) when it was first bought. If you purchase a second-hand electric vehicle, then FBT exemption will not be applied if the original sales price was more than the luxury car tax limit; and
- The car is newly bought and used on or after 1 July 2022. It means that the car might have been bought prior to 1 July 2022, but it might eligible for the FBT exemption if it was not available to employees until 1 July 2022 or later.
The FBT exemption also includes benefits, such as:
- Maintenance or repairs, and
- Fuel, including electricity to charge and run EV.
However, the charging station is not included. The FBT exemption on electric vehicles applies to employers, the value of the fringe benefit is considered when working out the reportable fringe benefits of the employee. The value of the benefit is usually mentioned on the employee’s income statement. While you are not required to pay income tax on reportable fringe benefits, it is usually used to determine your adjusted taxable income for various areas, such as the Medicare levy surcharge, employee share scheme reduction, private health insurance rebate, and certain social security payments.
FBT exemption only applies when an employer gives a car to an employee. Sole traders and partners of a partnership are not employees and are not allowed to access the exemption personally.
Tax Rules for Home Charging Units
According to ATO, charging stations don’t come under FBT exemption for electric cars. It means that FBT could be applied if an employer offers a charging unit to an employee. If an employee buys a home charging unit, an employee can claim depreciation deductions for the unit’s cost over a number of income years if the vehicle is charged using that unit and the vehicle is used for income-producing purposes. However, on the other hand, if the vehicle is used for private purposes then charging the unit’s cost will be considered a private expense and not deductible.
According to ATO, the rate of 4.20 cents per km is fixed for operating costs for EVs given to an employee (from 1 April 2022 for FBT and 1 July 2022 for income tax).
|Rate applying to fringe benefits tax year or income year starting on and after||EV home charging rate|
|1 April 2022||4.20 cents per km|
By using this rate, you are not allowed to claim any costs related to costs incurred at commercial charging stations. You can use actual electricity costs if you can accurately calculate them.
Advantages and Disadvantages of Earn-Out Clauses When Selling a Business
Earn-out clauses for business sale has become popular. Business transactions include earn-out clauses where the vendors ‘earn’ part of the price of the purchase depends on the performance of the organisation post the transaction. Usually, an earn-out run for 1-3 years post-transaction date. In a sale, you need to include an earn-out:
- To cover the gap in the expectations of the sale price between the purchaser and the vendor. ‘At risk’ form of consideration that is represented by the earn-out. The vendors are rewarded via a higher sale price if the business produces outcomes.
- To provide incentives to the vendors who continue to work in the business and maintain the growth of the business post-sale.
Benefits of earn-outs:
- The sale price possesses a performance component to it – both purchaser and seller benefit.
- May help in reaching a sale where a price impasse could otherwise prevent the sale.
- There should be no dispute between parties if the calculation of the earn-out is easily measurable and transparent.
- Creation of equity where the business has lagging income, and new business initiatives when it’s a time of sale or high growth rate.
- The incremental sale price can be funded by the business that is out of realised growth.
What sharing platforms share information with the ATO?
A new reporting regime will start from 1 July 2023 and require platforms that support taxi services, such as ride-sourcing and short-term housing, to report their transactions to the ATO annually. The regime will embrace all additional platforms starting on July 1, 2024.
Platform providers are anticipated to record their transactions to the ATO every six months, even though the legislative instrument for the reporting regime is still in draft form (see LI 2022/D27).
What details about sellers will be known to the ATO?
For transactions on their platform, the platforms will provide information about the sellers, such as:
- ABN and business/trading name
- First, middle and surname (for individuals)
- Date of birth
- Business or residential address
- Telephone numbers and email address
- bank account details
- For platforms offering short-term accommodation
- Listed property name
- Listed property address
- Booked number of nights
The platforms will give aggregate quarterly data on the value of transactions, total gross income, industry type, etc.
According to the reporting regime, it doesn’t include platforms that are used to match suppliers to sellers and are not involved in transactions such as quotes for seeking help from or hiring tradies where accepting a job through the website is not allowed.