ATO home charging rate for EVs
With the increasing popularity and uptake of EVs, the ATO recently released a draft practical compliance guideline (PCG) 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 PCG can be applied for FBT (e.g. car fringe benefits, residual fringe benefits, or car expense payment fringe benefits) from 1 April 2022 and for income tax purposes (e.g. car expenses relating to carrying out income earning activities) from 1 July 2022.
Duplicate the above container for more 2 column sections OR Duplicate the below container for 1 column text only sections. (DON’T FORGET TO DELETE THIS CONTAINER)
Draft ATO method to calculate cost of home charging EV
The ATO has released a draft PCG 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 PCG can be applied for FBT purposes from 1 April 2022 and for income tax purposes from 1 July 2022.
According to the ATO, the EV home charging rate will be 4.20 cents per km. 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 substantiating any claims and the choice to rely on the PCG applies for the entire FBT or income year.
Example
Ian owns a zero emissions electric vehicle which he mainly uses for work but also for private purposes. For the relevant year, he maintains odometer records as well as a logbook. He works out that the business use percentage of the car for the year is 60% and he drove 26,000km. He charges his car at commercial charging stations while on the road and also at home. Using receipts he has retained, the cost of charging at commercial stations for the year amounted to $300 for the year. Using the PCG, he works out that his home charging electricity deduction is $655 (26,000km x 4.20c per km x 60%).
Ian has a choice to either deduct the $300 for the commercial charging stations as a part of his work-related car expense deduction claim or claim $655 worked out using the methodology contained in the PCG. Ian cannot claim both amounts. Since $655 is higher than $300, Ian chooses to rely on the PCG and have it apply for the entire income year.
Transitional measure
As a transitional measure, 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. This approach is only available for the opening odometer reading at 1 April 2022 or 1 July 2022 for FBT and income tax respectively.
For businesses
Businesses that can rely on the PCG include those that provide electric vehicles to employees (or associates) for private use that results in the provision of a car fringe benefit, residual fringe benefit, or car expense payment fringe benefit and are required to calculate the value of the benefit as 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
For individuals, the PCG 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 (i.e. those powered by a combination of liquid fuel and electricity) are not considered to be zero emissions vehicles and individuals that use plug in hybrids are unable to rely on the PCG even if the vehicle was used in carrying out income earning activities.
Disclaimer: The information on this page is for general information purposes only and is not specific to any particular person or situation. There are many factors that may affect your particular circumstances. We advise that you contact Mathews Tax Lawyers before making any decisions.