ATO Finalises EV Home Charging Guidance for FBT Purposes
Since the introduction of electric vehicle (EV) incentives by various state governments to encourage the uptake of EVs and other zero-emissions vehicles, the market share of EVs in Australia has increased significantly. EVs accounted for around 0.78% of vehicle sales in 2022, rising to 7.2% in 2023.
According to the Federal Chamber of Automotive Industries, while EVs still represent a relatively small proportion of total vehicle sales, sales volumes increased by 185% between 2022 and 2023, with 80,446 EVs sold in 2023 compared to 33,410 in 2022.
With the growing use of EVs for business purposes, the ATO has now finalised its compliance guideline outlining how to calculate electricity costs where eligible electric vehicles are charged at an employee’s or individual’s home.
ATO Compliance Guideline for EV Home Charging
The ATO released a draft compliance guideline last year to address how employers should calculate electricity costs for fringe benefits tax (FBT) purposes when EVs are charged at home. This guideline has now been finalised and applies from 1 April 2022.
Choice of Methodology
For FBT purposes, employers can choose to either:
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Use the methodology set out in the ATO guideline, or
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Determine the actual electricity cost incurred
This choice applies on a per-vehicle basis and must be used consistently for the entire FBT year. However, employers may change their chosen method for a vehicle in a later FBT year.
Vehicles Covered by the Guideline
It is important to note the scope of the guideline.
Included Vehicles
The guideline applies only to zero-emissions electric vehicles.
Excluded Vehicles
The guideline does not apply to:
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Plug-in hybrid vehicles that include an internal combustion engine
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Electric motorcycles
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Electric scooters
When the Guideline Can Be Used for FBT Purposes
The guideline may only be relied upon to calculate home charging electricity costs where all of the following conditions are met.
Employer and Vehicle Conditions
The employer:
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Provides an electric vehicle to an employee or their associate for private use, resulting in either a car fringe benefit, residual fringe benefit or expense payment benefit
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Provides the vehicle to an employee or associate who charges it using electricity at a residential premises
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Cannot practically segregate the electricity cost of charging the vehicle from other household electricity usage
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Is required to calculate the taxable value as part of its FBT obligations, including car fringe benefits, residual fringe benefits, car expense payment benefits or reportable fringe benefits amounts
Commissioner’s Accepted Electricity Rate
For FBT years commencing from 1 April 2022 onwards, the Commissioner will accept a rate of 4.20 cents per kilometre for calculating the electricity cost of charging an eligible electric vehicle at a residential premises.
Transitional Record-Keeping Arrangements
Transitional Period
A transitional approach applies for the 2022–23 and 2023–24 FBT years.
During this period, where odometer records have not been maintained, employers may use a reasonable estimate of kilometres travelled. This estimate can be based on:
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Service records
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Logbooks
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Other available information
Ongoing Record-Keeping Requirements
Once the transitional period ends, employers must maintain records of distance travelled. Where the operating cost method is used, a valid logbook will be required.
Reportable Fringe Benefits Obligations
Employers are reminded that even where an electric vehicle qualifies for an FBT exemption, the benefit must still be included in the employee’s reportable fringe benefits amount.
This means the taxable value of the benefit must still be calculated.
Where an employee has home-charged an electric vehicle throughout the year, paid their own electricity bills and provided the employer with the required declaration, the electricity cost will form part of the employee’s recipient contribution amount.
Key Takeaway for Employers
The finalisation of the ATO’s EV home charging guideline provides clarity for employers managing FBT obligations for electric vehicles. However, careful attention is required to ensure the correct methodology is applied, appropriate records are maintained and reporting obligations are met.
Speak to one of our accountants if you have any questions about the changes in tax for 2023.
