Plug-in hybrid car sales skyrocket to claim last-minute tax cuts

Sales of plug-in hybrid vehicles have soared ahead of changes to the fringe benefits tax rules.

The Federal Chamber of Automotive Industries (FCAI) VFACTS report for the first half of the year revealed that plug-in hybrid vehicle (PHEV) sales increased by nearly 130 per cent compared to the same time last year—and with good reason.

Ahead of major changes to the fringe benefits tax (FBT), which will impact plug-in hybrid vehicles, businesses are purchasing PHEVs in numbers.

At present, PHEVs are exempt from paying the FBT if they are priced below $89,332, regardless of how often the car is used for personal use.

Changes announced by the Australian Tax Office (ATO) in March this year, said that PHEVs will no longer be considered zero- or low-emissions cars from the 1^st of April 2025, however, fully electric vehicles (EVs) will still be exempt beyond the cut-off date.

The FBT is defined by the ATO as “a tax paid by employers on certain benefits provided to their employees, or their employees’ family or other associates”. It applies to work cars that are available for private use and can include utes to fleet cars and cars that were acquired by a novated lease.

On a technical note, employers pay the FBT, however, it can be passed on to employees if the employers choose to do so. If it is passed on, it’s paid from the employees’ after-tax earnings, which could mean less salary for employees.

Despite the upcoming changes to the Fringe Benefits Tax, the ATO claims that you can continue to claim the exemption if “use of the plug-in hybrid electric vehicle was exempt before 1 April 2025″, or if “you have a financially binding commitment to continue providing private use of the vehicle on and after April 1st, 2025″.

As the deadline approaches to claim the FBT exemption on plug-in hybrids, it’s no coincidence that many businesses and employees are hurrying to obtain PHEVs as employee and fleet cars.