Hybrid Tax Changes: What Should You Know
Hybrid vehicle sales have grown markedly in the past few years with 2025 being the first year hybrids outsold petrol models. Part of that demand has come from businesses leaning into how hybrid and electric vehicles have been treated from a tax perspective.
For hybrid vehicles, that treatment has now changed.
From 1 April 2025, plug-in hybrid electric vehicles are no longer classified as low-emissions vehicles for FBT purposes. This means the exemption many businesses relied on no longer applies.
If your business provides vehicles to employees, it’s worth stepping back and reassessing:
Are any of your vehicles PHEVs previously treated as exempt?
Are those vehicles available for private use?
Have you reviewed your FBT position for the 2025–26 year?
Depending on the answers, you may now have an FBT exposure where none existed before.
ATO guidance on PHEV home charging costs
There is some good news, however. The ATO has introduced a simplified method for calculating home charging costs, which can make compliance easier where employees charge vehicles at home.
The update to Practical Compliance Guideline PCG 2024/2 has provided a simple rate for the cost of electricity for fully electric vehicles (EVs) of 4.2 cents per kilometre, able to be used for fringe benefits tax (FBT) and income tax purposes for the last couple of years. For PHEVs however, it’s a little different.
First available for the 2024/25 FBT year, the PHEV option includes:
Keeping odometer readings at the beginning and end of the year
Keeping records of petrol costs
Providing the vehicle’s petrol consumption rate in standard hybrid driving mode
YK Partners have provided accounting and businesss advisory to clients and SMEs through a variety of such changes and in the recent hybrid vehicle FBT change, this is less about complexity and more about awareness. The rules have shifted and that’s usually where risk sits. For tailored guidance, get in touch with one of our experienced team.