Tax and electric vehicles for Australian businesses in 2023

Maximising efficiency and minimising costs when EVs are part of your fleet

Supporting a global shift to sustainability

The adoption of electric vehicles (EVs) is on the rise in Australia, driven by a growing awareness of their environmental benefits and tax incentives. According to the Australian Electric Vehicle Council, the number of EVs on the road almost doubled in 2022, with business accounting for around a quarter of all sales.

Navigating the tax implications can be daunting for businesses considering integrating EVs into their fleet. Let’s take a look at:

  • the types of EVs and their tax calculations
  • pros and cons of EV types – and what might suit your business model
  • how your accountant may optimise tax benefits and ensure compliance with EV tax rules and initiatives.

The three types of electric vehicles and their tax calculations

1. Battery Electric Vehicles (BEVs)

BEVs use an electric motor and rely solely on electricity for power. BEVs produce zero emissions and are charged using a standard power outlet at home or by connecting to a public charging station.

Tax calculations for BEVs are primarily based on their purchase price, including any applicable luxury car tax (LCT) and goods and services tax (GST). Since July 2022, employers no longer pay fringe benefit tax (FBT) on eligible electric cars and associated expenses.

Pros:
  • Zero tailpipe emissions
  • Lower operating costs than fossil fuels
  • Potential access to government incentives and grants.
 Cons:
  • Limited driving range and longer charging times
  • Higher upfront purchase costs
  • Limited availability of charging infrastructure.

2. Plug-in Hybrid Electric Vehicles (PHEVs)

PHEVs combine an internal combustion engine with an electric motor and battery, offering flexibility and extended driving range.

Tax calculations for PHEVs consider both the electric and combustion components, with the electric portion attracting tax incentives.

Pros:
  • Flexibility to switch between electric and combustion modes
  • Extended driving range
  • Reduced emissions compared to conventional vehicles.
 Cons:
  • Higher purchase cost compared to conventional vehicles
  • Ongoing maintenance and cost of internal combustion engine
  • Reliance on fossil fuels for longer trips.

Hybrid Electric Vehicles (HEVs)

HEVs use a combination of an internal combustion engine and an electric motor to achieve improved fuel efficiency.

Tax calculations for HEVs typically focus on the combustion engine's emissions and fuel consumption, reflecting their environmental impact.

Pros:
  • Improved fuel efficiency
  • Self-generate electricity through regenerative braking
  • Lower cost than fully electric vehicles.
 Cons:
  • Less carbon emissions reduction than BEVs
  • Dependency on fossil fuels for longer trips
  • Limited incentives and grants compared to fully electric vehicles.

Choosing the EV to suit your business

With different options available, it’s important to take the time to choose the right EV for your business, your needs and your overall financial goals. Some of the considerations are:

Operational needs and driving patterns – does the EV suit your:
  • daily driving distance
  • frequency of long trips
  • access to charging infrastructure?
Environmental goals – does the EV align with your:
  • commitment towards reducing carbon emissions and promoting sustainability?
Financial considerations – do the EV costs line up across:
  • upfront costs
  • ongoing maintenance expenses
  • potential tax benefits associated with each EV type?

How your accountant can support your EV investment

In the fast-changing EV environment, it pays to partner with an expert who is on top of the latest taxation and regulatory implications for your business. This includes understanding advantageous tax structures, identifying all relevant tax incentives and ensuring ongoing compliance with relevant tax laws and regulations to help you get the most from your EV investment.

Your accountant can help with:

  • analysing depreciation schedules and tax incentives specific to EVs
  • advising on tax planning strategies to maximise deductions and credits
  • conducting cost-benefit analyses to assess the financial viability of integrating EVs into the business fleet.

EV tax minimisation and optimisation strategies

Like any vehicle upgrade, it’s important to consider the financial implications of incorporating EVs into your fleet. Your accountant will be able to advise you on the most appropriate strategies for your business. Some of the options and questions to evaluate include:
  • Opting for eligible EVs that qualify for government incentives, grants, or exemptions.
  • Structuring leases or financing arrangements to optimise tax deductions.
  • Strategically timing EV purchases to align with favourable tax periods.
  • Implementing efficient record-keeping systems to track expenses and claim applicable tax benefits.
  • What are the available tax incentives, grants, and rebates specific to EVs in Australia?
  • How can we optimise the depreciation schedule for EVs and maximise our tax benefits?
  • What compliance requirements should we be aware of when incorporating EVs into our fleet?
  • Are there any specific reporting obligations or record-keeping practices related to EV tax considerations?
  • Engaging with energy providers to explore cost-effective charging solutions.

Stay across EV tax implications and initiatives

The EV market is continuing to evolve as more vehicles become available and government policy adapts. EVs can play a role in helping you to reduce your carbon footprint, but it’s important to consider your environmental goals within a broader context.

As businesses look to introduce EVs to their fleet, it’s crucial to understand the tax implications and get expert support that’s tailored to your business. An accountant can help you to understand and optimise tax calculations, including the pros and cons of each EV type. This means you can make an informed decision that’s aligned to your operational needs and financial goals – while making moves towards a low carbon future. 

Optimise your investment when you add EVs to your business fleet.

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