Right now, one of the hot topics in the world of novated leases and salary sacrifices is that PHEVs and EVs don’t count when it comes to fringe benefit tax – with the catch being that in the case of PHEVs, this only applies to novated leases set up by 31 March 2025 at the latest.
If you’re interested in negotiating a salary sacrifice deal with your employer, then you may be interested in getting the sort of car that sees you paying a bit less tax. But what is a BEV, a PHEV or an EV, and what’s the difference?
At FinCar, we believe in helping people with novated leases, so here we are to help you with the terminology so you can pick the vehicle that works best for you and your situation. Are you ready? Then let’s get started…
The Different Types of Electric Vehicles
The reason why EVs and PHEVs are exempt from fringe benefit tax is part of the government’s push to encourage the uptake of electric vehicles as a way of reducing carbon emissions and urban air pollution. Unlike your traditional car, which uses an internal combustion engine (ICE), EVs rely on electricity to get the wheels turning. This means that they don’t produce any emissions or pollution out of the exhaust pipe – although the way that the electricity charging up the battery may have some carbon emissions involved, which is another story.
However, not all EVs are created equal. All EVs rely on electricity to get the wheels turning; however, some don’t just use electricity. Some use both electric motors and an ICE, and these are known as hybrids. You’ll sometimes see these called HEVs (standing for hybrid electric vehicle).
However, there are different sorts of hybrids, with the big difference being how the battery supplying the electric motor with energy is charged up. The earliest types of hybrid engine used the energy from braking and from keeping the motor turning over to power up the battery – these are known as “mild hybrids” or MHEVs. The only way that these ones get the battery topped up is from the kinetic energy that ultimately comes from the ICE. You can’t plug them in.
But what if you want to plug the vehicle in to top up the battery power, much like you’d charge your phone or your laptop? Well, this is exactly what a plug-in hybrid electric vehicle (PHEV) will do. As the name suggests, you can top up the battery via a charger or a wall box, or even a bog-standard electric plug.
The Advantages Of PHEVs
PHEVs give you the best of both worlds, as they can use the ICE or the electric motor – or even both at once if you want to. This makes them more popular with those who want the low-carbon aspects of electric motoring but want or need to use an ICE as well. For example, if you do a lot of motoring that would drain a battery quite quickly, such as lots of towing or lots of treks uphill, then having the ICE there as backup will ensure that you get the range you need. However, around town, you can rely on the electric motor.
In fact, the electric part of a PHEV will be in its element around town, as urban running, with all its stops and starts, will go through the petrol (or diesel) in an ICE quite quickly, even with things like stop–start engine technology.
In fact, if you do the combined sort of motoring, involving both rural and urban running, a PHEV will let you charge up the battery the way a mild hybrid (MHEV) would, using regenerative braking and similar technology. However, if you have just been running around town and you haven’t been using the motor enough to top up the battery that way, then you can find a charger or plug the vehicle in at home if you have a wall box.
Battery Electric Vehicles
Of course, not everybody wants to head out of town or tow heavy loads on a regular basis. In this case, you might not want an ICE at all. This is what happens in a BEV or “battery electric vehicle”, which is what a lot of people mean when they talk about EVs. Technically, BEVs and all the different hybrids, including PHEVs, are electric vehicles, but popular usage doesn’t always stick to technical details.
A BEV only uses electricity, and the only way to juice them up again is to plug them in. We’ve all seen those chargers popping up in supermarket carparks and in other locations around town. These charging stations (which are often referred to as fast chargers) do a quick job of charging the battery, but they aren’t the only way. You can also do the job at home; in fact, if you opt for an EV, getting a wall box so you can charge at home would be a must.
Which Are Better: PHEVs or EVs?
One of the biggest drawcards of a PHEV, in my mind at least, is that if you find yourself running out of both petrol and electricity, it’s possible to get going again by catching a lift to the nearest bowser and walking back with a full jerrycan of fuel. This isn’t possible if you rely purely on electricity.
However, if you don’t do that sort of motoring, BEVs have another advantage. When 1 April 2025 rolls around, these will still be left out from fringe benefit tax calculations if you get one as part of a salary package or novated least. This isn’t the case for PHEVs – so if you want to save at tax time but still have the benefits of hybrid motoring technology, you’d best be in quick!
If you want to know how much you can save, then have a play with our calculator. And if you have any questions about novated leases, then talk to our team today!