ZLEV novated leasing arrangements and bundling home charging station costs – OK?

Many financiers are offering novated leasing arrangements for a zero low emission vehicle (‘ZLEV’) where both the cost of the car and cost of installing home charging equipment are capitalised into the lease.

For attendees at last year’s FBT Roadshow, we raised concerns about the ZLEV exemption only being available for the car component and whether such a lease would be viewed as a bona fide lease for tax purposes.

The ATO has since published an edited private ruling EPA 1052199224005 in which these concerns were raised and the following questions addressed/responses provided:

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?

Yes. The component of the lease relating to the car is considered to be a bona fide lease for the car for FBT purposes.

Is the only fringe benefit provided by the employer under the novated ZLEV leasing agreement a car fringe benefit in accordance with section 7 of the FBTAA?

No. The benefits provided by the employer under the ZLEV lease quote are a ‘car fringe benefit’ being the ZLEV and the separate benefits being the home charging equipment and installation.

Is the provision of a home charging station a property fringe benefit under section 40 of the FBTAA?

Provision of the home charging equipment is a property fringe benefit.

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 a home charging station?

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.

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 ZLEV?

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.

If the car benefit provided under the novated ZLEV 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?

No. The provision and installation of home charging equipment is not exempt under section 8A of the FBTAA. Providing the employee with a 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.

Welcomed Guidance

The ruling, albeit a private ruling, provides welcome guidance given new research from the National Automotive Leasing and Salary Packaging Association (NALSPA) shows ZLEV uptake has increased in outer suburban areas based on FBT exemption.

Presumably the FBT exemption has helped Australians better afford electric vehicles.

It would seem the FBT exemption may survive the Government’s 1 April 2025 review… or will it???

We will be covering this topics and many others at the 2025 FBT Roadshow. Come join us and find out all you need to know about FBT obligations and be prepared in 2025!

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