Salary sacrificing your next Volvo? New rules incoming

On 31 March, the Fringe Benefits Tax exemption for plug-in hybrid vehicles (PHEVs) ends. Which means from 1 April company car drivers can no longer use salary sacrificing arrangements on new PHEV leases.

To date, the government has treated both PHEVs and pure battery electric vehicles (BEVs) as zero emissions vehicles. As such, drivers are not required to pay Fringe Benefits Tax on the car and associated expenses – including servicing, insurance and running costs.

The exemption, combined with novated leasing structures, has proved attractive for company car drivers, because it means the cost of the car, and ongoing driving costs, can be deducted from salaries pre-tax.

The exemption allows for private usage too – meaning PHEV and BEV drivers to date have been able to save thousands of dollars a year. Hence many employers have actively offered PHEVs and BEVs via a novated lease agreement as part of employment packages.

At the same time, demand for novated leases has risen significantly according to industry data, with electric vehicles last year reported to be making up 35-40 per cent of the total.

However, from 1 April, the Federal Government will no longer classify PHEVs and leasing arrangements made after that date as low or zero emissions vehicles. The expectation is that employers and company car drivers seeking to salary sacrifice will opt for pure electric vehicles instead, as BEVs will still be FBT exempt.

Which cars qualify?

To qualify for the exemption, fully electric cars need to come in under the Luxury Car Tax threshold, which is $91,387 for the current financial year.

That means Volvo Cars’ EX40 and EX30 as well as the C40 Recharge will still qualify when the exemption changes come into force from 1 April.

Get the latest information and offers on Volvo Car Australia’s fully electric range here – or contact your local retailer.