Private ruling: FBT - electric vehicle charging station.
Date of advice: 31 May 2024
Published: 15 July 2024
Ruling period: Year ending 31 March 20YY | Year ending 31 March 20YY | Year ending 31 March 20YY
Date scheme commenced: 1 April 20YY

Ruling: Q1: Where the cost of installing home charging equipment is capitalised into the lease for an electric vehicle ("EV"), is the lease considered a bona fide lease of the car for the purposes of the application of the fringe benefits tax ("FBT") legislation? In particular, is the lease considered bona fide for the purposes of section 162 of the Fringe Benefits Tax Assessment Act 1986 ("FBTAA") and for the purpose of determining the car's "leased car value" as defined in section 136(1) of the FBTAA? | A1: Yes. | Q2: Is the only fringe benefit provided by the employer under the novated EV leasing agreement a car fringe benefit in accordance with section 7 of the FBTAA? | A2: No. | Q3: Is the provision of a home charging station a property fringe benefit under section 40 of the FBTAA? | A3: Yes. | Q4: Where the statutory formula method is used to calculate the taxable value of the car benefit in accordance with section 9 of the FBTAA, is the base value of the car inclusive of any costs in relation to installing an EV home charging station? | A4: No. | Q5: Where the operating cost method is used to calculate the taxable value of the car benefit in accordance with section 10 of the FBTAA, are the lease payment amounts (inclusive of home charging station installation costs) included in the operating costs of the EV? | A5: No. | Q6: If the car benefit provided under the novated EV lease is considered exempt from FBT in accordance with section 8A of the FBTAA, are the home charging station installation costs included in the provision of that benefit, and therefore also exempt from FBT? | A6: No.

Relevant facts and circumstances: The employer wishes to provide EV leasing arrangements to its own employees. Under the proposed novated EV lease arrangements, the financier will acquire the EV and lease it to the employee who will then novate the lease to their respective employer. The amount paid by the financier for the acquisition of the EV will include any accessories which can be fitted by the dealer, or after-market, such as bull bars, tow bars, window tinting et cetera. The lease payments will incorporate: • the purchase cost of the car • the provision and installation of the home charging equipment • the financing for the acquisition price of both (including any added accessories), and • the various running costs associated with the EV (such as fuel, servicing, insurance, et cetera). The employer's novated lease arrangement will not entitle the employee to purchase the EV at the end of the lease, nor will the employee be able to keep using that car after the expiry of the lease. The EV Charging station is: • bolted into the wall of the house. • sits on a bracket, where the bracket is mounted onto the wall. • needs to be installed and de-installed by a licensed electrician as it is wired into the household electricity supply.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986, subsection 7(1) | Fringe Benefits Tax Assessment Act 1986, section 8A | Fringe Benefits Tax Assessment Act 1986, subsection 8A(2) | Fringe Benefits Tax Assessment Act 1986, subsection 136(1) | Fringe Benefits Tax Assessment Act 1986, subsection 162(1) | A New Tax System (Luxury Car Tax) Act 1999 section 25-1

Reasons for decision: Detailed Reasoning - Question 1: Where the cost of installing home charging equipment is capitalised into the lease for an electric vehicle ("EV"), is the lease considered a bona fide lease of the car for the purposes of the application of the fringe benefits tax ("FBT") legislation? In particular, is the lease considered bona fide for the purposes of section 162 of the FBTAA and for the purpose of determining the car's "leased car value" as defined in section 136(1) of the FBTAA? | Summary: Yes. The component of the lease relating to the car is considered to be a bona fide lease for the car for FBT purposes. | Detailed Reasoning - Detailed reasoning: A 'fringe benefit' as defined in subsection 136(1) of the FBTAA is a benefit provided to an employee (or associate) by an employer (or associate) or a third party under an arrangement with the employer (or associate) in respect of the employee's employment and such benefit is not otherwise exempted. A 'car fringe benefit' is defined in subsection 136(1) of the FBTAA to mean 'a fringe benefit that is a car benefit'. Subsection 7(1) of the FBTAA describes what constitutes a 'car benefit'. 7(1) Where: (a) At any time on a day, in respect of the employment of an employee, a car held by a person (in this subsection referred to as the 'provider): (i) Is applied to a private use by the employee or an associate of the employee; or (ii) Is taken to be available for the private use of the employee or an associate of the employee; and (b) either of the following conditions is satisfied: (i) the provider is the employer, or an associate of the employer, of the employee; (ii) the car is so applied or available, as the case may be, under an arrangement between: (A) the provider or another person, and (B) the employer, or an associate; The application or availability of the car shall be taken to constitute a benefit provided on that day by the provider to the employee or associate in respect of the employment of the employee. Subsection 136(1) of the FBTAA provides that a 'car' has the meaning given by subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997). That provision defines a 'car' as: ...a motor vehicle (except a motorcycle or similar vehicle) designed to carry a load of less than 1 tonne and fewer than 9 passengers. The electric vehicle is a car as defined in subsection 136(1) of the FBTAA because it is a road vehicle designed to carry a load of less than one tonne and fewer than nine passengers. Section 162 of the FBTAA provides that a 'car held by a person' refers to a car that the person owns, or leases, or that is otherwise made available to the person by another person. Under subsection 136(1), the leased car value, in relation to a car held but not owned by a person a particular time, means: (a) In a case to which paragraph (b) does not apply - the amount that the person could reasonably be expected to have been required to pay to purchase the car from the owner at that time under an arm's length transaction; or (b) if the person commenced to lease the car at that time from a lessor who purchased the car at or about that time - the cost price of the car to the lessor. In order for a car fringe benefit to be provided, the lease must be a bona-fide lease. The Fringe Benefits Tax - a guide for employers states that an arrangement will be a bona fide lease if all the following criteria are met: 1. The lease is made on an arm's length basis and is on commercial terms. 2. The residual value of the vehicle is based on the cost of the car (i.e. a reasonable valuation of the estimated market value at the end of the lease). 3. There is no pre-existing agreement to buy the vehicle at the end of the lease. In this case, the lease will be made on an arm's length basis with commercial terms and there is no pre-existing agreement to buy the vehicle at the end of the lease. The residual value of a vehicle must be based on the cost price of the car for a lease to be a bone-fide lease. The 'cost price' of a car is referred to for the purposes of calculating the taxable value of car fringe benefits under both the statutory formula and cost basis methods under Division 2 of Part III of the FBTAA. [1] The term 'cost price' is defined in subsection 136(1) of the FBTAA. Sub-subparagraph (a)(ii)(A) of the definition states that 'cost price' in relation to a car owned by a person, means: the expenditure incurred by the person (other than expenditure in respect of registration or in respect of a tax on, or on a transfer of, registration) that is directly attributable to the acquisition or delivery of the car or, if subsection 7(6) applies in relation to the car, the leased car value of the car when the person first took the car on hire; The purchase of the home charging equipment, and installation, does not form part of the 'cost price' of the car as defined in subsection 136(1) of the FBTAA. This is because the expenditure incurred on the home charging equipment and installation is not directly attributable to the acquisition or delivery of the car. It is therefore necessary to split the lease into components, one being a lease for the car and the other(s) being the lease for the home charging equipment and installation. These components then need to be considered separately with appropriate treatments applied for FBT purposes. Once this is done it then follows that the component of the lease that is for the car is a bona fide lease for FBT purposes. | Detailed Reasoning - Question 2: Is the only fringe benefit provided by the employer under the novated EV leasing agreement a car fringe benefit in accordance with section 7 of the FBTAA? | Summary: No, the benefits provided by the employer under the Novated Lease Quote are a 'car fringe benefit' being the EV and the separate benefits being the home charging equipment and installation. | Detailed Reasoning - Detailed reasoning: A car owned, leased or otherwise held by an employer and provided to an employee for their private use results in a 'car benefit'. As discussed in question one, the EV is a car as defined in subsection 136(1) of the FBTAA because it is a road vehicle designed to carry a load of less than one tonne and fewer than nine passengers. Therefore, if all of the other requirements of subsection 7(1) have been met, a car benefit has been provided. Under the Novated Lease Quote, the employer has also provided the home charging equipment and installation. Consideration must be given to whether the vehicle and associated accessories are composite benefits or separate benefits, to determine the tax implications for both the employer and the employee. As discussed, the provision of the EV by the employer to the employee is a car fringe benefit if it meets all of the requirements of subsection 7(1) of the FBTAA. The taxable value of a car fringe benefit can be calculated by using the statutory formula method or the operating cost method as discussed in response to Question 3 and 4 of this ruling, respectively. However, the home charging equipment is not part of the car fringe benefit as it is does not form part of the car, it does not travel with, or otherwise belong to the car. To enable it to be used it has to be affixed to a wall and connected into the electrical wiring of the residential premises. This requires installation and to be uninstalled by a licensed electrician. Therefore, the benefits provided by the employer under the Novated Lease Quote are a 'car fringe benefit' being the EV and separate benefits being the provision and installation of home charging equipment. | Detailed Reasoning - Conclusion: You are providing your employee with multiple benefits. The first benefit is the EV, being a car fringe benefit under section 7 of the FBTAA. The other benefits are the provision and installation of home charging equipment. The taxable value of each benefit will need to be calculated separately as explained in this ruling. | Detailed Reasoning - Question 3: Is the provision of a home charging station a property fringe benefit under section 40 of the FBTAA? | Summary: Provision of the home charging equipment is a property fringe benefit. The FBTAA applies fringe benefits tax to a benefit at the time it is provided to the employee. Any applicable fringe benefits tax liability that arises from the benefit being provided by the employer to the employee has to be determined based on the benefit in the state and form it was in at the time it was provided. Subsection 136(1) of the FBTAA defines 'provide' as: (a) in relation to a benefit - includes allow, confer, give, grant or perform; and (b) in relation to property - means dispose of (whether by sale, gift, declaration of trust or otherwise): (i) if the property is a beneficial interest in property but does not include legal ownership - the beneficial interest; or (ii) in any other case - the legal ownership of the property. Section 40 outlines when a property benefit is provided. It states: Where, at a particular time, a person (in this section referred to as the 'provider') provides property to another person (in this section referred to as the 'recipient'), the provision of the property shall be taken to constitute a benefit provided by the provider to the recipient at that time. Subsection 136(1) contains the following further definitions relevant to property benefits: 'property' means: (a) intangible property; and (b) tangible property. 'tangible property' means goods and includes: (a) animals, including fish; and (b) gas and electricity.' 'intangible property' means: (a) real property; (b) a chose in action; and (c) any other kind of property other than tangible property; but does not include: (d) a right arising under a contract of insurance; or (e) a lease or licence in respect of real property or tangible property. Sufficient facts have not been provided to permit a determination to be made on the time at which the electric charger is provided and what form it is in at that time. This requires detailed consideration of the contracts under which the electric charger is provided to the employee. The electric charger is provided to the employee at the time the employee either gains legal ownership or beneficial ownership of it. This is either prior to or after installation. In any case the provision of the electric charger will be a property benefit, if it is provided: • prior to installation - it will be property as tangible property that is a good, with the benefit arising from its installation being a separate fringe benefit, the classification of which is determined by the arrangements under which that installation is provided. • as an installed unit (including both the charger and its installation) - it will be property as real property, forming part of the structure of the building in which it is installed. This conclusion is reached applying the principles outlined in Taxation Ruling TR 2004/16 - Income tax: plant in residential rental properties. Furthermore, this property benefit will be a fringe benefit on the basis that it is provided to an employee (or associate) by an employer (or associate) under an arrangement with the employer (or associate) in respect of the employee's employment. The property benefit is also not a benefit that is otherwise exempted or excluded. This outcome is consistent with the ATO view outlined in the ' Electric vehicles and fringe benefits tax ' fact sheet [2] which states: If you give your employee an electric vehicle charging station, this is a property fringe benefit. | Detailed Reasoning - FBT treatment as a property fringe benefit: Under the FBTAA, the taxable value of a property fringe benefits depends upon whether the benefit is an in-house property fringe benefit or an external property fringe benefit. An 'in-house property fringe benefit' is defined in subsection 136(1) of the FBTAA as follows: in relation to an employer, means a property fringe benefit in relation to the employer in respect of tangible property; (a) where both of the following conditions are satisfied: (i) the provider is the employer or an associate of the employer; and (ii) at or about the provision time, the provider carried on a business that consisted of or included the provision of identical or similar property principally to outsiders; or (b) where all of the following conditions are satisfied: (i) the provider is not the employer or an associate of the employer; (ii) the property was acquired by the provider from the employer or an associate of the employer (which employer or associate is in this definition called the seller); and (iii) at or about the provision time, both the provider and the seller carried on a business that consisted of or included the provision of identical or similar property principally to outsiders. An 'external property fringe benefit' is defined in subsection 136(1) of the FBTAA to mean, in relation to an employer, a property fringe benefit other than an in-house property fringe benefit. In this case, the employer is providing the employee with home charging equipment under an arm's length transaction. Therefore the benefit provided is an external property fringe benefit. Section 43 of the FBTAA states that the taxable value of an external property fringe benefit in relation to an employer to a year of tax is: (a) where the provider was the employer or an associate of the employer and the recipients overall benefit was purchased by the provider under an arm's length transaction - the amount paid or payable by the provider in respect of the recipients current benefit; (b) where the provider was not the employer or an associate of the employer and the employer, or an associate of the employer, incurred expenditure to the provider under an arm's length transaction in respect of the provision of the recipients current benefit - the amount of that expenditure; or (c) in any other case - the notional value of the recipients current benefit reduced by the amount of the recipients contribution insofar as it relates to the recipients current benefit. Paragraphs 51(b) and (c) above are not applicable and therefore paragraph 51(a) is applied to determine the taxable value. Notional value is defined in subsection 136(1) of the FBTAA as: In relation to the provision of property or another benefit to a person, means the amount that the person could reasonably be expected to have been required to pay to obtain the property or other benefit from the provider under an arm's length transaction. | Detailed Reasoning - Question 4: Where the statutory formula method is used to calculate the taxable value of the car benefit in accordance with section 9 of the FBTAA, is the base value of the car inclusive of any costs in relation to installing an EV home charging station? | Summary: No, the base value of the car is exclusive of any costs in relation to the provision and installation of home charging equipment as these costs are not considered to be part of the leased car value. | Detailed Reasoning - Detailed reasoning: Section 9 of the FBTAA specifies the taxable value of a car fringe benefit under the Statutory Formula method is to be calculated as follows: (0.2 × Base value of the car × Number of days during that year of tax on which the car fringe benefits were by the provider ÷ Number of days in the year) - Amount (if any) of the recipeint's payment With respect to the 'base value of the car', paragraph 9(2)(i) of the FBTAA outlines that where a car is owned or leased by the provider, the base value is to consist of: (i) Where, at the earliest holding time, the car was owned by the provider or an associate of the provider, the amount calculated in accordance with the formula AB, where: A is the cost price of the car to the provider or associate, as the case may be; and B is: (A) In a case where the commencement of the year of tax is later than the fourth anniversary of the earliest holding time - 2/3; or (B) In any other case -1; and (ii) In the case to which subparagraph (i) does not apply - the amount calculated in accordance with the formula AB, where: A is the leased car value of the car at the earliest holding time; B is: (A) in a case where the commencement of the year of tax is later than the fourth anniversary of the earliest holding time - 2/3; or (B) in any other case -1; and (iii) The cost price of each non-business accessory that: A was fitted to the car after the earliest holding time and before the end of the year of tax; and B remained fitted to the car at a time during the year of tax when the car was held by the provider. Where the lease started when a lessor first bought the car, the base value is the cost price to the lessor (other than expenditure on registration or transfer of registration) directly attributable to the acquisition or delivery of the car. Where the lessor acquired the car at some other time, the base value is the arm's length market value at the time the car was first held. Under the Novated Leased Quote in this arrangement, the provision and installation of home charging equipment is incorporated into the lease costs to be paid by the employer. The payments for the provision and installation of home charging equipment do not form part of the arm's length market value of the car when it was first held by the lessor, and are not directly attributable to the acquisition or delivery of the car to the lessor. Therefore, the cost of the home charging equipment and its installation should not be included in the 'leased car value' as defined in subsection 136(1). Consequently, the cost of the home charging equipment and its installation does not form part of the base value of a car for the purposes of subsection 9(2) of the FBTAA. For completeness, a home charging station hardwired into a residential premises is not considered to be a non-business accessory for FBT purposes. A ' non-business accessory' , as defined in subsection 136(1) in relation to a car, means an accessory fitted to the car, whether at the factory where the car was assembled or at some other place, other than an accessory required to meet the special needs of any business operations in relation to which the car is used. As per the ATO's Electric Vehicle fact sheet entitled Electric Vehicles and Fringe Benefits Tax [3] , 'an accessory is fitted if it is secured, welded, wired into or otherwise permanently fixed to the electric vehicle. An accessory may also be considered fitted to the electric vehicle if the accessory is integral to the operation of the electric vehicle and ordinarily accepted to stay permanently in the electric vehicle for example, the spare tyre jack.' In this case, the home charger is not physically fitted to the EV, rather it is installed at the home of the employees. Accordingly, the home charging equipment is not considered to be non-business accessories and should not be added to the base value of the car. | Detailed Reasoning - Question 4: Where the operating cost method is used to calculate the taxable value of the car benefit in accordance with section 10 of the FBTAA, are the lease payment amounts (inclusive of home charging station installation costs) included in the operating costs of the EV? | Summary: No, where the home charging infrastructure is 'rolled up' in a lease payment, the cost of the home charging equipment and its installation would need to be separately identified and not included in the operating cost method. | Detailed Reasoning - Detailed reasoning: Subsection 10(3)(a) of the FBTAA provides that the 'operating cost' of the car includes: (i) any 'car expenses' (other than insured repair expenses or expenses in respect of registration and insurance) relating to the car incurred during the holding period; and (ii) so much of any expense paid or payable in respect of the registration of, or insurance in respect of the car as is attributable to the holding period; ... (v) In a case where the car is leased to the provider so much of the charges paid or payable under the lease agreement as are attributable to the holding period. Subsection 136(1) of the FBTAA defines 'car expenses' as: (a) the registration of, or insurance in respect of, the car; (b) repairs to or maintenance of the car; or (c) fuel for the car. Relevantly as per the lease agreement and quote, the 'operating cost' for purposes of 10(3)(a) of the FBTAA will include the lease payments. Under the arrangements in this case, the home charging equipment and its installation are incorporated into the novated lease costs paid by the employer. It is considered the provision and installation of home charging equipment does not fall within the meaning of 'registration' for the purposes of paragraph (a) of the definition of the term 'car expense' in subsection 136(1). It is also considered that the home charging equipment and its installation do not fall within the meanings of either, or both, 'repairs' or' maintenance' for the purposes of paragraph (b) of the definition of the term 'car expense' in subsection 136(1). It is further considered that the home charging equipment and its installation do not fall within the meaning of 'fuel' for the purposes of paragraph (c) of the definition of the term 'car expense' in subsection 136(1). Therefore, the payments incorporated into the lease for the home charging equipment and its installation are specifically excluded from the operation of subparagraph 10(3)(a)(i) of the FBTAA. Consequently, such payments are not included as part of the operating costs of the car during the relevant holding period. Where the home charging infrastructure is 'rolled up' in a lease payment, the cost of the charging station and installation would need to be separately identified and would not be included as an operating cost as they are not car fringe benefits. [4] | Detailed Reasoning - Question 5: If the car benefit provided under the novated EV lease is considered exempt from FBT in accordance with section 8A of the FBTAA, are the home charging station installation costs included in the provision of that benefit, and therefore also exempt from FBT? | Summary: No, the provision and installation of home charging equipment is not exempt under section 8A of the FBTAA. Providing your employee with an EV home charging station is a property fringe benefit. If you reimburse your employee for the cost of purchasing and installing a charging station, this is an expense payment fringe benefit. | Detailed Reasoning - Detailed reasoning: Section 8A of the FBTAA provides an exemption for the private use of cars that are zero or low emission vehicles. The requirements of section 8A are outlined in the ATO Fact Sheet entitled ' Electric vehicles and fringe benefits tax ', which states that for the exemption to apply, all of the following requirements must be met: (a) The benefit is a car benefit (b) The vehicle must be a car, which is a zero or low emissions vehicle (c) The car was first held and used on or after 1 July 2022 (d) The car is used or available for private use by a current employee or their associates (including family members) (e) No amount of luxury car tax (LCT) has become payable on the supply or importation of the car. | Detailed Reasoning - The benefit is a car benefit: A 'car fringe benefit' is defined in subsection 136(1) of the FBTAA to mean 'a fringe benefit that is a car benefit'. Subsection 7(1) of the FBTAA describes what constitutes a 'car benefit'. As discussed in question 2, there are two benefits provided under the Novated Lease Quote, a car fringe benefit being the EV and a property fringe benefit being the provision and installation of home charging equipment. As previously discussed, where home charging infrastructure is 'rolled up' in a lease arrangement, the cost of the charging station would need to be separately identified to ensure concessional FBT treatment is not afforded to a benefit which is not a car benefit. | Detailed Reasoning - Conclusion: The provision and installation of home charging equipment is a property fringe benefit and is not exempt from FBT under section 8A of the FBTAA. [1] ATOID 2006/253 Car Fringe Benefits: cost price of a car - extended car warranty [2] https://www.ato.gov.au/law/view/pdf/afs/afs_ev_fbt.pdf, viewed 30 May 2024. [3] https://www.ato.gov.au/law/view/pdf/afs/afs_ev_fbt.pdf, viewed 30 May 2024. [4] https://www.ato.gov.au/law/view/pdf/afs/afs_ev_fbt.pdf, viewed 30 May 2024.