ATO’s New Fringe Benefits Tax Rules for Plug-In Hybrid Electric Vehicles: What You Need to Know Before April 2025.

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In case you missed it, the Australian Taxation Office (ATO) has recently made a significant update that could affect how you handle your plug-in hybrid electric vehicle (PHEV) when it comes to tax. Starting April 1, 2025, Plug-in Hybrid Electrical Vehicles (PHEVs) will no longer be classified as zero or low emissions vehicles for Fringe Benefits Tax (FBT) purposes. So, that FBT exemption you’ve been enjoying? It’s potentially about to vanish like the last of your office’s coffee supply when it’s time for afternoon tea.

What’s Changing, Exactly?

The ATO has clarified that, from April 1, 2025, plug-in hybrid electric vehicles (PHEVs) will generally no longer qualify for the electric car FBT exemption. But before you panic and throw your car keys out the window, let’s break this down:

  1. Existing Exemptions: If you’re already driving a PHEV that’s been exempt from FBT and you’ve made a binding financial commitment to continue providing it for private use past April 1, 2025, you might still be in the clear. However, this doesn’t apply to optional extensions.
  2. Changes to Agreements: If your agreement changes in the slightest, —whether it’s an:
    • Optional extension to your agreement
    • Breaks in novation agreements
    • Changes to the financial obligations under the lease
    • A new employer entering the picture

Your FBT exemptions will no longer apply from the moment that change takes effect.

What Should You Do Next?

Now that we’ve got the doom and gloom out of the way up front, here’s what you should be doing to make sure you’re not caught off guard by this change:

  1. Review Your Agreements: Take a good hard look at your current PHEV arrangements. Are they locked in with a binding commitment that spans beyond April 1, 2025? If not, it’s time to consult the fine print. After all, it’s better to know now than to face a tax shock later.
  2. Consult a Tax Professional: You didn’t get into business to navigate complex tax legislation, right? So, now’s the time to get in touch with a tax expert such as your Accountant, who can help you understand how these changes will impact your FBT situation. They’ll help you steer clear of the dreaded FBT liabilities and keep your accounts cleaner than your desk.
  3. Stay Up-to-Date: Tax rules can be as changeable as the weather in Melbourne, so stay informed about any new ATO updates. If you want to keep your vehicle benefits, it’s essential to be on top of the changes. Ignorance won’t be bliss in this case—it’ll just be expensive.

In Summary

The ATO’s decision to remove the FBT exemption for PHEVs is a big change, and it’s going to affect many businesses and individuals who’ve been happily riding the hybrid wave. But with a little preparation, professional advice, and a good read of your agreements, you can still stay on top of your tax obligations.

So if you have a plug-in hybrid electric vehicle, visit the ATO for more information: FBT for Plug-In Hybrid Electric Vehicles.

Stay proactive, stay informed, and don’t let this change sneak up on you. It’s much easier to plan now than to scramble later. If you need help navigating these new ATO changes give us a call on 07 5539 4143.

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