Electric vehicles have become increasingly popular in recent years, with more and more people making the switch to these eco-friendly cars. As the popularity of electric vehicles continues to grow, it’s important to understand how to calculate the cost of electricity used to charge them, particularly when charging takes place at home.
To help employers and individuals calculate the cost of electricity when charging an electric vehicle at home, the Australian Taxation Office (ATO) has released draft guidelines outlining a methodology for doing so. These guidelines may be relied upon by employers and individuals who meet the criteria for Fringe Benefits Tax (FBT) and income tax purposes, respectively.
Under the draft guidelines, an employer or individual can choose whether to use the methodology outlined in the guidelines or determine the actual cost of the electricity used. This choice applies per vehicle and for the entire income or FBT year, but can be changed from year to year.
For the FBT tax year or income year commencing on or after 1 April 2022, the rate for the EV home charging rate is set at 4.2 cents per kilometer. This rate is multiplied by the total number of relevant kilometers traveled by the electric vehicle during the relevant income or FBT year.
It’s important to note that if electric vehicle charging costs are incurred at a commercial charging station, a choice must be made. The EV home charging rate can be used, but only if the commercial charging station cost is disregarded. Alternatively, if the commercial charging station cost is used, the EV home charging methodology cannot be applied.
To substantiate any claims made under the EV home charging rate, necessary records such as receipts must be kept, as per the normal record-keeping rules.
If you wish to rely on the EV home charging rate to calculate your electricity charging expenses, you will need to keep a record of the distance traveled by the car, generally through odometer records, in the applicable FBT year to 31 March or the income year to 30 June. If an employer chooses to apply the draft guidelines and the EV home charging rate for FBT purposes, a valid logbook must be maintained if the operating cost method is used.
Individuals who choose to apply the draft guidelines and the EV home charging rate for income tax purposes must have a valid logbook to use the logbook method of calculating work-related car expenses. It is recommended that a logbook is maintained to demonstrate work-related use of vehicles. They must also have one electricity bill for the residential premises in the applicable income year to show that electricity costs have been incurred.
It’s important to note that the draft guidelines can only be relied upon in relation to zero emissions vehicles. Plug-in hybrids that have an internal combustion engine, for example, cannot be used to calculate the EV home charging rate.
These guidelines are expected to be finalized by the ATO soon and will apply from 1 April 2022 for FBT purposes or 1 July 2022 for income tax purposes.
So, if you’re an electric vehicle owner, it’s important to familiarize yourself with these guidelines and ensure you keep accurate records to support any claims made under the EV home charging rate. With the right information and record-keeping practices, you can take full advantage of this cost-saving opportunity while also doing your part to reduce your carbon footprint.
