Claiming deductions for an electric car you own is essentially the same as for a petrol or diesel car. The key issue is quantifying the cost of electricity used to charge the vehicle at a private residence. The ATO have issued Draft Practical Compliance Guideline PCG 2023/D1 authorising a rate of 4.2c/km to represent the cost of electricity. Here are some key things to note:

• This method can be also used for an electric car fuelled by a hydrogen fuel cell.
• It does not extend to “plug in hybrid” (PHEV) vehicles.
• If you want to choose this method, you can’t also claim commercial charging station costs.
• Substantiation applies, including keeping at least one electricity bill. 

TIP: This guideline is for individuals claiming their EV using the logbook method or for businesses providing EVs to employees under the FBT rules. Without it there would be difficulty in recognising the cost of charging which can be considerable. Note that owners of electric vehicles are eligible to use the cents per km rate (78c for 2022/23 and 85c for 2023/24) available to other car types even though that rate incorporates the notional direct cost of fossil fuels.

Salary packaging of certain electric vehicles used by employees, directors, and related individuals can be extremely tax efficient. On 27 July 2022, following an announcement in the Chalmers October 2022 mini budget, legislation was introduced to dramatically advantage lower value electric vehicles under the FBT system. Key elements of this exemption are:

• It applies to car benefits first provided on or after 01/07/22.
• a “car” is a motor vehicle (excluding motorcycles, scooters, and similar vehicles) designed to carry a load of less than one tonne and 8 or less passengers including the driver.
• The first time anybody owned the car must be on or after 01/07/22.
• Second hand cars qualify as long as they were acquired new on or after 01/07/22.
• Qualifying cars include battery electric vehicles, hydrogen fuel cell vehicles  and plug in hybrid vehicles.
• The plug-in hybrid exemption is already being phased out by 01/04/25 unless arrangements extending beyond that date are entered before it.
• The car must never have been subject to Luxury Car Tax (2023 FY threshold $84,916).
• The exemption can apply in relation to benefits provided to employees (not including future or former employees) and their associates. 

Note, the ATO has confirmed that home charging equipment doesn’t fall within the scope of the FBT exemption for electric cars. It is considered a separate benefit and subject to FBT if paid for (or reimbursed) by an employer. To avoid paying FBT it is best to pay for this equipment personally. Note, it would be possible to claim depreciation deductions for the cost of the unit where it is used to charge a vehicle that is used for income producing purposes.

Note also, while the provision of an eligible electric car is exempt from FBT, the taxable value of the benefit still needs to be considered when working out if an employee has a reportable fringe benefits amount (RFBA).

More Information: Electric cars exemption | Australian Taxation Office (ato.gov.au)

Electric vehicles and fringe benefits tax | Legal database (ato.gov.au)

The following are examples of cars with current pricing potentially below the Luxury Car Tax Threshold:

• Hyundai Kona Electric ER or SR Elite
• Tesla Model 3 Rear-Wheel Drive
• Kia Niro S Electric
• Volvo XC40 Recharge Plus
• Mitsubishi Outlander PHEV

 TIP: If you wish to rely on this it is best to do some due diligence to ensure the car actually fits within the eligibility criteria. It may not be a good idea to rely on representations by a car salesman.