Private ruling: Plug-in hybrid exemption
Date of advice: 19 May 2026
Published: 3 August 2026
Ruling period: DD MM 20XX | DD MM 20XX
Date scheme commenced: DD MM 20XX

Ruling: Q1: For the purposes of applying the plug-in hybrid electric vehicle exemption under section 8A of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), does the machinery-of-government transfer merging entity A and entity B, resulting in employees becoming employed by entity C, cause the original binding financial commitment (in place as at 1 April 2025) to cease and a new binding financial commitment to arise? | A1: Yes.

Relevant facts and circumstances: Entity C has recently merged the operations of entity A and entity B. As part of the merger the existing staff of entity A have transferred to entity C in X 20xx. Entity A is separately registered for FBT and lodged its own FBT return separate from the applicant. There are currently X staff members who have packaged a plug-in hybrid vehicle. These are currently treated as exempt plug-in hybrid electric vehicles (PHEV) by entity A. These employees have remained as employees of entity A, however the entity is in the process of being wound up. The staff have current novated lease agreements for PHEV's that quality for the FBT exemption for zero or low emission vehicles. The agreements were entered into prior to DD MM 20YY, therefore a binding financial commitment existed as at DD MM 20YY. The staff will be transferred to entity C. The terms and conditions of their employment, including the novated lease agreement for the PHEV, will remain unchanged.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 section 8A | Fringe Benefits Tax Assessment Act 1986 section 135S | Fringe Benefits Tax Assessment Act 1986 section 135U | Fringe Benefits Tax Assessment Act 1986 section 135X

Reasons for decision: Summary: The machinery-of-government transfer results in a change of employer for fringe benefits tax (FBT) purposes. This causes the original binding financial commitment held by entity A to cease and a new binding financial commitment to arise with the new employer, entity C. The exemption will no longer apply due to the change in employer. | Detailed Reasoning - Detailed reasoning: Section 8A of the FBTAA provides an exemption from FBT for the private use of electric vehicles. From 1 April 2025, plug-in hybrid electric vehicles are no longer a 'zero or low emissions vehicle' under subsection 8(2) of the FBTAA and are no longer eligible for the section 8A exemption. Subsection 8A(2) of the FBTAA was amended by Schedule 2 item 5 of Treasury Laws Amendment Act 2022 (No.86, 2022) which explains the application of the amendments: (1) The amendments of the Fringe Benefits Tax Assessment Act 1986 made by this Schedule apply to benefits provided on or after 1 April 2025. (2) Despite subitem (1), the amendments do not apply to the application or availability of a car at a particular time (the relevant time) on or after 1 April 2025 if: (a) the application or availability constitutes a car benefit because of subsection 7(1) of the Fringe Benefits Tax Assessment Act 1986; and (b) before 1 April 2025, the employer, the employee, or an associate of the employer or of the employee, committed to the application or availability of the car, in respect of the employment of the employee by the employer, for a period that began before 1 April 2025 and includes the relevant time; and (c) at no time on or after 1 April 2025 and before or at the relevant time did the employer, the employee, or an associate of the employer or of the employee, commit to the application or availability of the car, in respect of the employment of the employee by the employer, for a period that includes the relevant time; and (d) before 1 April 2025 a car benefit relating to the car was provided; and (e) the car benefit referred to in paragraph (d) of this subitem was an exempt benefit in relation to a year of tax because of section 8A (Exempt car benefits: zero or low emissions vehicles) of that Act. As per the above, from 1 April 2025 private use of a plug-in hybrid electric vehicle is no longer eligible for the exemption under section 8A of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), unless both of the following apply: • the use was exempt before 1 April 2025; and • there existed a financially binding commitment to continue providing that private use on and after 1 April 2025. This means that the FBT exemption will no longer apply where there is a change to the financial obligations of one of the parties under a lease because of a change to the lease agreement. This includes changed to lease payments or the residual value of the car. This is because there is a change to a financially binding commitment. Furthermore, a benefit is no longer eligible for the FBT exemption from the time there is a change of employer. Any change of employer for FBT purposes, even within the same group of companies, is a new commitment to the application or availability of the car by the new employer. Information about changes to a pre-existing commitment are included on our website at QC 103132 FBT on plug-in hybrid electric vehicles. | Detailed Reasoning - FBT for State and Territory bodies: Part XIC of the FBTAA, concerning the application of the Act to nominated State or Territory bodies, governs who is the employer for Fringe Benefits Tax purposes for State or Territory Governments and bodies associated with them. The State or Territory is the employer of the employees employed by that Government. This includes all parts of that Government, being its departments, committees, et cetera. However, section 135S of the FBTAA permits State or Territories to nominate eligible State or Territory bodies as being employers for Fringe Benefits Tax purposes. A State or Territory may nominate one or more eligible bodies as separate employers. As per section 135U of the FBTAA, a nominated State or Territory Body is taken to be a company. Therefore, for the purposes of the FBTAA, the nominated State or Territory Body is to be treated as a separate legal entity meaning that State or Territory is no longer the employer of the relevant employees. Instead, the nominated body is treated as the employer of each employee who has a sufficient connection with that body. Section 135X of the FBTAA, does allow State and Territory bodies to enter into an agreement with the Commissioner where a transitional event occurs. However, it only applies in respect of certain provisions as follows: Section 10 Whether a year of tax is to be treated as a log book year of tax for the purposes of calculating the taxable value of car fringe benefits using the cost basis. Section 26 Whether a year of tax that is a base year of tax for the purposes of section 26 is to continue to be treated as a base year of tax Subdivision D of Division 10A of Part III Whether a register kept in relation to the value of car parking fringe benefits is a valid register. Sections 58B to 58D Whether a benefit is an exempt benefit as a result of the relocation of an employee. Section 58S Whether a benefit is an exempt benefit in relation to trainees engaged under the Australian Traineeship System. Section 65CA Whether a fringe benefit is an amortised fringe benefit relating to remote area home ownership schemes. Section 152A Whether a benefit is covered by a recurring fringe benefit declaration. | Detailed Reasoning - Application to your circumstances: Entity A is the employer of the employees for FBT purposes, being separately registered for FBT and having lodged its own FBT return separate to the applicant, until the transfer of the employee to entity C at which point entity C will become the employer. The FBT exemption for electric vehicles is contained in section 8A of the FBTAA. This is not covered by section 135X of the FBTAA. Therefore, as the employer has changed, the financially binding commitment has changed despite the terms of the deed of novation remaining the same. The PHEV exemption will not apply to the entity C as the agreement was not in place between entity C and the employees prior to 1 April 2025.

Question: For the purposes of applying the plug-in hybrid electric vehicle exemption under section 8A of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), does the machinery-of-government transfer merging entity A and entity B, resulting in employees becoming employed by entity C, cause the original binding financial commitment (in place as at DD MM 20YY) to cease and a new binding financial commitment to arise?