Does the EV discount end on a PHEV if it was settled before 1 April 2025?
No, if you have a pre-existing leases on a PHEV you are still entitled to the FBT exemption up until the end of the lease.
Why will the PHEV FBT exemption stop from 1 April 2025?
The Australian Taxation Office (ATO) has released advice that from 1 April 2025 plug-in electric hybrids vehicles (PHEVs) will no longer be classified as zero or low emissions vehicles under FBT law. This means that the FBT exemption will not apply to new PHEV leases entered into from 1 April 2025.
PHEVs leased before 1 April 2025 will remain eligible for the FBT exemption if the following two requirements are met:
What does a “financially binding commitment” mean?
A financially binding commitment needs to be in place by 1 April 2025 for the exemption to apply.
This means that:
- a customer / employee has ordered and received a car by way of a novated lease arrangement, and
- there is a financial penalty if the order is cancelled.
In practice, this means that the vehicle has been delivered and available for use and a signed lease agreement is in place – prior to 1 April 2025.
Will the FBT exemption continue to apply for existing PHEV leases?
All existing PHEV leases will be honoured provided there are no breaks in the commitment to the use of the PHEV, such as change in employment or unpaid leave. More information on “breaks” below.
What happens if I change employer? Will the exemption apply if I carry the lease over to my new employer?
If a customer moves employer, the change of employer will trigger a new commitment and a loss of the FBT exemption. This is because the ATO view a change of employer as a new commitment to the availability of the car by the new employer. This applies to a change of a new employer even within the same group of companies.
What happens if I go on leave such as unpaid leave? Will I still be eligible for the exemption under my existing lease?
If an employee on leave does not use the PHEV during their absence, this can interrupt the existing agreement, potentially affecting the FBT exemption.
- Note that if an employee goes on unpaid leave but prepays the lease payments in advance and the novation does not stop, there would be no change in the commitment and the FBT exemption would be maintained
We encourage customers to check the ATO website to understand leave impacts on their PHEV lease.
What happens with my PHEV lease if I go on parental leave?
If you go on parental leave and continue to pay the lease payments/running costs through your salary packaging balance during the period of leave, the PHEV exemption would continue as there is no change to the financial commitment.
What happens if a PHEV is replaced due to damage on an existing lease?
If a TOTAL LOSS occurs and the PHEV is replaced (like for like), standard change of asset documentation is required, and the exemption will still apply. Note that the replacement vehicle must be noted on the existing contract and all other contract details including pricing and end date must remain the same.
Does a car ordered prior to 1 April 2025, but not physically delivered or in use by the customer until after 1 April 2025, qualify for the exemption?
No. The car needs to be physically available for the customer by 1 April 2025 to quality for the exemption.
Am I able to break my PHEV lease early and re-lease prior to 1 April 2025 to receive the exemption.
The ATO has cautioned against breaking leases and re-leasing prior to 1 April 2025.