Keeping track of the costs to charge Electric Vehicles (EVs) at home can be difficult. The good news is the Australian Taxation Office (ATO) has finalised new guidelines to make this easier. This article will help you understand these guidelines and how to apply them for income tax purposes and Fringe Benefits Tax (FBT) purposes.

What is the ATO's new guideline for EV charging costs?

The Practical Compliance Guide (PCG), which is effective from 1 April 2022 for Fringe Benefits Tax (FBT) and from 1 July 2022 for income tax, introduced a 4.2 cents per kilometre rate to calculate the electricity costs of charging Electric Vehicles (EVs) at home. This simplified method helps both employers and individual taxpayers manage their EV-related expenses more easily. By using this rate, you can easily determine the cost to charge electric cars, plug-in hybrid vehicles, and other EVs without needing detailed records of every charging session. This method, known as the shortcut method, can also simplify the tracking of expenses for FBT purposes, making it easier for EV drivers and businesses to calculate and manage costs.

Using the 4.2 cents per kilometre rate is particularly beneficial for those with EVs like the Tesla Model and other popular electric cars. It ensures that electricity costs are accurately accounted for without the hassle of complex calculations or maintaining a logbook. This approach also considers various charging locations, including home charging stations, public charging stations, and solar panel systems.

Key Changes from the Draft PCG

Two significant changes were made from the earlier draft of the PCG:

Extension of transitional rules

The transitional rules now allow for odometer readings, if not kept, to include the start of the 2023/24 FBT and income years. This extension provides more flexibility for taxpayers who may have missed recording their odometer readings initially.

Combination of calculation methods

There is now a provision for combining the cents per kilometre method with actual external costs. This can be done provided the percentage of the vehicle's charge based on the type of charging location can be determined. This change allows for a more accurate calculation of electricity costs for charging EVs, taking into account various charging locations such as home charging stations, public charging stations, and other external charging networks.

Using the shortcut method for home EV charging

The 4.2 cents per kilometre rate is particularly useful when the home charging station cannot separate the EV charging station’s electricity consumption from the household’s total costs. Both employers and individual taxpayers can opt for this 'shortcut' method, and the choice can be made per vehicle and changed annually.

If this method is chosen, all other actual charging costs incurred, including those from commercial charging stations, must be disregarded. This simplifies the calculation of electricity costs for charging EVs, making it easier to manage expenses without tracking each individual charging session.

Fringe Benefits Tax (FBT)

Even if an Electric Vehicle (EV) qualifies as an FBT-exempt car, employers must still calculate the 'notional' taxable value for the employee’s reportable fringe benefits amount. For non-exempt EVs, the taxable value of the fringe benefit must be calculated.

The electricity costs of the EV can be included in:

• the total operating expenses under the Operating Cost method.
• Employee contributions applicable for both the Operating Cost and Statutory Rate methods.
• the taxable value of a residual fringe benefit.
• the taxable value of an expense payment fringe benefit for any EV costs reimbursed or paid by the employer.

Income tax deductions for EV charging

Individual taxpayers can claim their EV's electricity costs as a tax deduction in their personal income tax return for any portion incurred in generating assessable income. This is allowed if they use the logbook method and own or lease the car in their name (not salary packaged). They can either use the 4.2 cents per kilometre method prescribed by the PCG 2024/2 or keep receipts for actual electricity expenditure. Note that using the general cents per kilometre method for car deductions (currently 85 cents/km) includes electricity costs within this rate, which are not separately deductible.

Record keeping requirements

Maintaining adequate records for five years is crucial for both Fringe Benefits Tax (FBT) and income tax substantiation requirements. If relying on the PCG, you need to keep the vehicle’s odometer records at the start of each year to determine the kilometres travelled. If odometer records were not initially kept, a reasonable estimate based on service records or other relevant information can be used.

Other required records include:

• A valid logbook for the FBT Operating Cost method or the logbook method for income tax purposes.
• An electricity bill for the residential home to show that electricity costs were incurred, unless the home has solar panels providing sufficient electricity. In such cases, the 4.2 cents per kilometre method cannot be applied.

For FBT purposes, the costs to charge an electric vehicle, including electric cars, plug-in hybrid vehicles, and other EVs, must be tracked accurately. This applies to various charging locations, whether using a home charging station, public charging stations, or an EV charging network. It's important to note that the shortcut method simplifies the process but requires thorough record-keeping to comply with Australian government regulations.

Additionally, ensuring you have the necessary receipts and maintaining records of electricity costs incurred for EV charging will help you accurately calculate deductions and manage your tax obligations efficiently.

For income tax purposes, using the logbook method allows you to claim deductions for electricity costs, provided the car is owned or leased in your name and is not salary packaged. This method is particularly useful for tracking costs associated with charging EVs at home or other locations.

Plug-in hybrid vehicles

The shortcut method, including the 4.2 cents per kilometre rate, applies only to fully electric vehicles. There is still no Australian Taxation Office (ATO) guidance regarding electricity costs for plug-in hybrid vehicles, electric motorcycles, or electric scooters. This means that EV drivers using plug-in hybrids or other types of electric vehicles will need to find alternative methods to calculate and manage their charging costs.

For those with plug-in hybrid vehicles, it's important to note the charging cost of these vehicles, whether at home charging stations, public charging stations, or other ev charging stations, cannot currently be calculated using the shortcut method. The same applies to charging costs for electric motorcycles and electric scooters, as there is no specific provision for these types of vehicles under the current ATO guidelines.