With the increasing popularity and uptake of electric vehicles (EVs), the ATO has now released a draft compliance guideline which contains the methodology for calculating the cost of electricity when an eligible electric vehicle is charged at an employee’s or an individual’s home. The methodology contained in the guideline can be applied for FBT (eg car fringe benefit, residual benefit, or car expense payment fringe benefit) from 1 April 2022 and for income tax purposes (eg car expenses relating to carrying out income-earning activities) from 1 July 2022.
According to the ATO, the EV home charging rate will be 4.20 cents per kilometre. If charging costs are incurred at a commercial charging station, a choice must be made: if the EV home charging rate is used, the commercial charging station cost will be disregarded, and vice versa. However, records such as receipts must still be kept to substantiate any claims, and the choice to rely on the guideline applies for the entire FBT or income year.
Example
Alinta owns a zero emissions EV which she mainly uses for work but also for private purposes. For the relevant year, she maintains odometer records as well as a logbook. She works out that for the year the business use percentage of the car is 60% and she drove 26,000 km. She charges her car at commercial charging stations while on the road, and also at home. Using receipts she has retained, the cost of charging at commercial stations amounted to $300 for the year. Using the guideline, she works out that her home charging electricity deduction would be $655 (26,000 km × 4.20c per km × 60%).
Alinta has a choice to either deduct the $300 from the commercial charging stations as a part of her work-related car expense deduction claim or deduct the $655 worked out using the methodology contained in the guideline. She cannot do both. Since $655 is higher than $300, Alinta opts to rely on the guideline and have it apply for the entire income year.
For the 2023 FBT and income tax year, the ATO will accept a reasonable estimate based on service records, logbooks, or other available information where odometer records have not been maintained as a transitional measure. This approach is only available for the opening odometer reading at 1 April or 1 July 2022.
Businesses that can rely on this guideline include those that provide electric vehicles to their employees (or associates) for private use, where that results in the provision of a car fringe benefit, residual benefit or car expense payment fringe benefit and the business is required to calculate the value of benefit as a part of FBT obligations. For example, the EV home charging rate can be used to determine the recipient contribution component for the statutory formula method for car fringe benefits. Similarly, it can be used to determine both the operating cost and recipient contribution if the operating cost method is used.
For individuals, the guideline can only be relied on to calculate the cost of charging an electric vehicle if a zero emissions electric vehicle was used in carrying out income-earning activities and relevant records have been kept during the year. It should be noted that plug-in hybrids (ie those powered by a combination of liquid fuel and electricity) are not considered to be zero emission vehicles and individuals that use plug-in hybrids are unable to rely on the guideline even if the vehicle was used in carrying out income-earning activities.
The guideline is currently in draft form but is expected to apply to the 2023 FBT and income tax year.
Source: www.ato.gov.au/law/view/view.htm?docid=%22DPC%2FPCG2023D1%2FNAT%2FATO%2F00001%22
www.ato.gov.au/Business/Fringe-benefits-tax/Types-of-fringe-benefits/fbt-on-cars,-other-vehicles,-parking-and-tolls/electric-cars-exemption/