Electric vehicles (EVs) aren’t just a novelty in Australian business fleets anymore; they’re becoming a practical reality. But with this shift comes a new challenge: if your business provides electric vehicles or plug-in hybrid vehicles (PHEVs) to employees, for tax purposes you need to account for the home electricity used to charge the cars. How do you accurately calculate these costs without installing expensive separate meters or relying on guesswork?
What’s changed? The ATO has updated its guidance (PCG 2024/2) to include plug-in hybrid electric vehicles, not just pure electric ones. This means businesses can now use the ATO’s simplified method to calculate home charging costs for both types of vehicles. Previously, only zero-emission EVs qualified, but hybrid vehicles are now covered under a seven-step methodology separating electric and petrol kilometres.
The simplified approach for fully electric vehicles is straightforward: multiply your total annual kilometres by 4.2 cents per kilometre. This provides an ATO-accepted figure for home charging costs. For plug-in hybrids, you’ll need to calculate petrol costs, determine petrol kilometres, subtract them from total kilometres, and apply the 4.2c rate to the electric-only portion.
To use this method, businesses must keep accurate records — odometer readings at the start and end of each FBT year (1 April to 31 March) and proof of home electricity expenses, such as power bills in employees’ names. If you haven’t kept these records before, the ATO is offering transitional relief for the 2024–2025 year, allowing reasonable estimates based on service history or other data.
This update streamlines FBT compliance and helps ensure you’re not paying more tax than necessary. If employees pay for charging themselves, the cost can reduce the taxable fringe benefit dollar for dollar. If your business reimburses those costs, you can include the calculated amount in your FBT return. The changes apply from 1 April 2024 (FBT) and 1 July 2024 (income tax), meaning they’re already in effect for most businesses.
Even with these simplified rules, EV-related tax treatment can be tricky. Plug-in hybrids lost their FBT exemption after March 2025, and exemptions only apply under specific conditions. Getting professional tax advice ensures your business maximises available benefits and stays compliant with ATO requirements. Contact us to discuss how these changes affect your business and to make sure you’re getting the best result for your electric vehicle fleet.