Electric vehicles update - 4.2 cents per kilometre rate for home charging

There has been a recent development in relation to the tax implications of charging electric vehicles. 

The Australian Taxation Office (ATO) has released guidance providing a shortcut method for valuing electricity used for home charging of electric vehicles.

This development is in addition to our article 'Electric cars now exempt from FBT - what this means for you'.

Calculating electricity costs for home charging of electric vehicles

The ATO issued finalised Practical Compliance Guideline (‘PCG’) 2024/2 on 1 February 2024, regarding calculating electricity costs for home charging of electric vehicles. The PCG detailed the following:

• Employers and individuals can choose to use the methodology outlined in the PCG or they can determine the cost of the electricity by calculating its actual cost. The choice is per vehicle and applies for the whole income or FBT year
• A 4.2c per kilometre rate can be applied for calculating the electricity charging costs of electric vehicles, as a shortcut method
• A combination of the cents per kilometre calculation method and actual external costs can be used where it is possible to determine the percentage of the vehicle's charge based on the type of charging location
• The shortcut method only applies to vehicles that are solely fuelled by electric power
• This shortcut method guidance provides assistance for:
  1. Employers calculating the Reportable Fringe Benefit amount that applies to the electric vehicle where using the operating cost method to value the benefit (noting that even though the vehicle is FBT exempt, it is still a reportable fringe benefit).
  2. Individuals claiming income tax deductions in their personal individual income tax returns.

There is still no guidance from the ATO regarding electricity costs for plug-in hybrid vehicles, electric motorcycles, or electric scooters.

Home wall charging units for charging of electric vehicles

We also note that the ATO has confirmed its view, in relation to the fringe benefits tax implications, of the purchase and installation of wall charging units used in an employee’s home. The ATO has confirmed that the home charging station is not a car expense associated with providing a car benefit for electric cars. This means that the wall charging unit costs will not form part of the FBT exemption for electric vehicles. 

Therefore, the purchase and installation of wall charging units will be subject to fringe benefits tax.

How BDO can help

if you have any questions regarding this article or would like more information on employment taxes, please contact a BDO employment tax specialist