Plug-in hybrids lost the FBT exemption on 1 April 2025

The FBT year ended on 31 March 2025. Your 2025 fringe benefits tax return and the payment are both due on 21 May 2025, or on 25 June 2025 if a registered tax agent lodges it electronically and you were already on that agent's FBT client list by 21 May. Something else happened the day after the year closed. On 1 April 2025, plug-in hybrid electric vehicles stopped being eligible for the electric car FBT exemption. Whether that costs you anything turns on a document you signed months ago.

The dates and rates for the year ended 31 March 2025

The FBT year runs from 1 April to 31 March. The rate for the year ended 31 March 2025 is 47%. The Type 1 gross-up rate, used where you can claim GST credits on the benefit, is 2.0802. The Type 2 rate is 1.8868. The ATO publishes all three on its fringe benefits tax rates and thresholds page.

Lodgment and payment fall on the same day. The ATO's guidance on lodging your FBT return and paying puts it at 21 May, unless your tax agent lodges electronically, in which case it is generally 25 June. The condition attached to the June date is the part people miss: you must already be an FBT client of that agent by 21 May. Being added to the list on 1 June does not buy you the extension.

If you are registered for FBT but have no liability for the year, lodge a notice of non-lodgment rather than nothing. It stops the ATO seeking a return from you later.

One consequence worth planning for. If your FBT for the year ended 31 March 2025 is $3,000 or more, you move onto quarterly instalments through your activity statements in the following year. We handle the return and the instalment schedule together for that reason, as part of taxation and compliance.

What the electric car exemption actually covers

There is no FBT on the private use of an eligible electric car. The ATO's guidance on the electric cars exemption sets conditions that must all be met:

• The car is a zero or low emissions vehicle. For the year ended 31 March 2025 that meant a battery electric vehicle, a hydrogen fuel cell electric vehicle or a plug-in hybrid.
• It is a car designed to carry a load of less than one tonne and fewer than nine passengers, including the driver.
• The first time the car is both held and used is on or after 1 July 2022.
• It is used by a current employee or their associate, such as a family member.
• Luxury car tax has never been payable on the importation or sale of the car.

Motorcycles and scooters are not cars for FBT purposes. An electric one does not qualify, whatever its emissions.

The exemption extends to associated car expenses: registration, insurance, repairs or maintenance, and fuel, including the electricity used to charge the car. A home charging station is not on that list. It is not a car expense at all. It may instead be a property fringe benefit or an expense payment fringe benefit, and it is valued under those rules.

The luxury car tax test catches more cars than the emissions test

Most people read the luxury car tax condition as a price cap on the car they are buying. It is not. The test is whether the car's value was below the LCT threshold for fuel-efficient vehicles at the time it was first sold in a retail sale, and in any subsequent sale.

The threshold that applies is the one for the financial year of that sale, not the year you acquired the car. The ATO's luxury car tax rate and thresholds for fuel-efficient vehicles were:

• 2022-23: $84,916
• 2023-24: $89,332
• 2024-25: $91,387

There is no discretion in it. If a car was first sold new above the threshold for the year of that sale, LCT was payable and the exemption is gone permanently, in your hands and in the hands of every later owner. Buying the car second hand does not reset it. You have to establish what it sold for when it was new, and you have to keep the evidence.

What changed for plug-in hybrids on 1 April 2025

From 1 April 2025, a plug-in hybrid electric vehicle is not a zero or low emissions vehicle under FBT law and is not eligible for the electric car exemption.

There is a transitional rule and it is narrow. Per the ATO's guidance on FBT on plug-in hybrid electric vehicles, you can continue to apply the exemption only where both of these are true:

• The plug-in hybrid was used, or available for use, before 1 April 2025, and that use was exempt.
• You had a financially binding commitment, in place before 1 April 2025, to continue providing the use of the car for private purposes on and after that date.

You have entered into a commitment at the point there is an obligation to undertake a transaction and it cannot be backed out of. It must be financially binding on one or more of the parties, and it must relate to the private use, or availability for private use, of the car by an employee or an associate.

The ATO states it has no discretion to extend the 1 April 2025 date, including where delivery was delayed by circumstances nobody controlled. A car ordered in January and delivered on 15 April 2025 is outside the exemption. That is the whole rule.

Where both conditions are met, the exemption runs until the pre-existing commitment ends or changes. Not beyond it.

Five things that end a pre-existing commitment

Each of these creates a new commitment, and the exemption stops from that date:

• An option to extend. The agreement has to be for a pre-determined period. A three-year lease running to 31 March 2027 with an option for two further years is exempt to 31 March 2027 and no longer, even if the option is taken up.
• A break in the novation. Where the novation stops, so does the exemption. An employee going on unpaid leave and picking up the lease personally is the common case.
• A change to the financial obligations. Changes to lease payments or to the residual value of the car. Adding a bull bar and roof racks to the lease changes the residual, and that is enough.
• A change of employer for FBT purposes. Even a move within the same group of companies is a new commitment.
• No commitment to a designated employee. Pool cars fail here. Where staff book a plug-in hybrid day to day, there is no binding commitment to provide that car to one person, so the exemption stops on 1 April 2025.

One thing that does not break it: a variation made under a clause that already permitted it. Where a bundled service charge in the lease allows the amount to change, changing it is not a new agreement.

The reportable fringe benefit does not go away

This is the part that surprises people. The reporting outcome is identical whether the car is exempt from FBT or not. Exempt means no tax for the employer. It does not mean the benefit disappears from the employee's record.

Take a Robina construction business as an example. It provides an employee with a plug-in hybrid under a novated lease entered on 1 April 2024 for a fixed three-year term to 31 March 2027. The GST-inclusive cost price is $62,000, the car is available for private use all year, the employee makes no contributions, and the business is entitled to GST credits on the lease, so the Type 1 gross-up rate applies.

Under the statutory formula, the taxable value is $62,000 × 20% = $12,400 for a full FBT year.

Because the car was available for private use before 1 April 2025, and the lease is a binding commitment for a pre-determined period, the exemption continues to 31 March 2027. FBT payable: nil.

The reportable amount is not nil. The notional taxable value of $12,400 is above the $2,000 reporting threshold, so it is grossed up at the Type 2 rate: $12,400 × 1.8868 = $23,396. That figure goes on the employee's income statement through Single Touch Payroll for the income year ending 30 June 2025.

The employee is not taxed on it. But as the ATO sets out in the consequences of having a reportable fringe benefits amount, it is added to taxable income for a long list of income tests. On a $95,000 salary, that employee's repayment income for a HELP debt becomes $118,396, not $95,000. The same figure feeds the Medicare levy surcharge, the private health insurance rebate, Division 293 tax, family assistance payments and child support.

Now the counterfactual. Had there been no binding commitment before 1 April 2025, the same car becomes a taxable car benefit from that date. FBT for the year ending 31 March 2026 would be $12,400 × 2.0802 × 47% = $12,123. The reportable amount stays at $23,396 either way.

What to do now

• List every electric and plug-in hybrid vehicle you provide, with the date each was first used or available for private use.
• Pull the lease or novation for each plug-in hybrid. Check three things: was it entered before 1 April 2025, is the term pre-determined, and when does that term end.
• Leave those agreements alone. Payment changes, residual changes, breaks in the novation and employer changes all reset the commitment.
• Treat pool plug-in hybrids as taxable from 1 April 2025. Take odometer readings at that date and start the records now. Bookkeeping done in April is worth considerably more than a reconstruction next May.
• Work out the notional taxable value of every exempt electric car, so the reportable amount on the income statements for the year ending 30 June 2025 is right.

If the change alters what your fleet should look like, model the FBT before you commit rather than after. That is a business advisory question. How the vehicle is paid for is a separate one, and we cover it under asset and vehicle finance.