Electric Vehicle FBT and CCS Explained

Electric vehicles (EVs) are increasingly salary packaged because they can be discounted or exempt from Fringe Benefits Tax (FBT).
However, families receiving Child Care Subsidy (CCS) should be aware that an EV can still affect their subsidy outcome.

This page explains how EV salary packaging interacts with CCS, why this can lead to lower CCS entitlements or reconciliation debts, and what families should check.

Key points

• Eligible electric vehicles can receive an FBT discount or full exemption (depending on vehicle cost and lease timing)
• Even where FBT is reduced or nil, an EV may still generate a Reportable Fringe Benefits Amount (RFBA)
• CCS is assessed using Adjusted Taxable Income (ATI), which includes RFBA
• An increase in ATI can reduce CCS or result in a repayment after annual balancing

Outcomes depend on individual circumstances.

Announced 2027 changes: From 1 April 2027, higher-priced EVs are expected to receive only a partial FBT discount. EVs at or below $75,000 are expected to keep the full discount; EVs above $75,000 but below the LCT threshold may retain a 25% discount only. Existing leases are expected to be unaffected. Read the ministerial announcement or see the full guide: EV Novated Lease FBT Changes From 1 April 2027.

EV FBT discount explained

Under Australian tax law, certain electric vehicles provided by an employer are entitled to an FBT discount. For most eligible EVs, the full taxable value is discounted to nil — effectively an exemption. This reduces the tax cost of salary packaging an EV.

However, the FBT discount does not automatically exclude the benefit from all income-tested government payments.

Current eligible vehicles:

• Battery Electric Vehicles (BEVs) and Hydrogen Fuel Cell vehicles first held from 1 July 2022
• Value at or below the fuel-efficient Luxury Car Tax threshold
• Plug-in hybrids (PHEVs) may qualify under transitional rules if their arrangement was in place before 1 April 2025

From 1 April 2027 (announced, not yet final law):

• EVs at or below $75,000: full FBT discount expected to remain
• EVs above $75,000 (up to the LCT threshold): 25% discount on payable FBT expected (75% of normal FBT remains payable)

CCSChecker models the current rules by default, with the announced 2027 settings available for planning.

How CCS income is assessed

Child Care Subsidy is assessed by Services Australia using Adjusted Taxable Income (ATI).

ATI includes:

• taxable income
• certain supplements and adjustments
• reportable fringe benefits

Because CCS uses ATI rather than taxable income alone, some benefits that are tax-exempt can still affect CCS. If this pushes your ATI across a threshold, you may experience a CCS cliff.

Adjusted Taxable Income (ATI) for CCS includes taxable income plus net investment losses, reportable fringe benefits (including from electric vehicles if over the $2,000 threshold), reportable super contributions, and certain other amounts, minus child support paid. For the full official formula and 2025-26 thresholds, refer to Services Australia — Child Care Subsidy.

Reportable Fringe Benefits and EVs

A Reportable Fringe Benefits Amount (RFBA) is the grossed-up taxable value of certain fringe benefits reported by an employer.

Important points:

• An employer may still calculate the taxable value of an EV even if the EV is FBT-exempt or discounted
• RFBA is generally reported only where the total taxable value of reportable fringe benefits exceeds $2,000 for the FBT year
• If reported, RFBA is included in ATI for CCS purposes

This is the mechanism through which an EV can affect CCS.

The gross-up: why the ATI impact is larger than the benefit value

Centrelink does not simply add the lease cost to your income. When RFBA is reported, the taxable value is grossed up by the Type 2 factor of 1.8868 before it is included in ATI.

Example: If your EV benefit has a taxable value of $15,000, the RFBA on your income statement is $28,302 ($15,000 × 1.8868).

This means the RFBA figure is roughly 1.9 times the underlying benefit value. The gross-up can push family income above the $85,279 lower CCS threshold unexpectedly, reducing the subsidy percentage.

How CCS adjusts the RFBA:

For most employees (standard employer), the full RFBA is added to ATI.

For employees of a Public Benevolent Institution, public hospital or qualifying charity (Section 57A employers), the CCS income test applies a multiplier of 0.53 to the RFBA. This reduces the ATI impact — but does not eliminate it.

Not all EVs generate a reportable amount. If the total taxable value of all your reportable fringe benefits stays below $2,000 for the FBT year, the employer may not report an RFBA at all. CCSChecker's EV tool models this threshold.

Worked example: EV and CCS

Scenario

• Family with two children in care
• Combined taxable income: $155,000
• EV salary packaged mid-year (standard employer)
• EV benefit taxable value: $18,000
• After gross-up (× 1.8868): RFBA of approximately $33,962

ATI calculation (standard employer)

• Taxable income: $155,000
• Plus RFBA (at 1.00 multiplier): $33,962
• Adjusted Taxable Income: $188,962

CCS impact

• CCS entitlement is assessed on $188,962, not $155,000
• The family falls into a lower CCS percentage band
• CCS paid during the year may have been based on the lower income estimate
• After year-end balancing, a repayment may be required

The EV is FBT-exempt, but the grossed-up reported value still affects CCS.

For Section 57A exempt employer employees: the $33,962 RFBA would be reduced to approximately $18,000 for CCS ATI purposes (× 0.53 multiplier). The CCS impact is still present but smaller.

Why this is commonly missed

EV salary packaging is often described as "FBT-free," which is accurate from a tax perspective.
However, CCS assessment is separate and focuses on income reporting, not tax payable.

Families may not realise that:

• an EV can be reportable even when FBT is nil or discounted
• CCS uses ATI rather than taxable income
• changes during the year affect CCS reconciliation

How CCS Checker helps

CCS Checker is designed to:

• include reportable fringe benefits, including EVs — model your EV impact
• model ATI changes and their effect on CCS
• show estimated daily out-of-pocket childcare costs
• highlight potential reconciliation risks earlier

This allows families to assess EV salary packaging with CCS impacts included.

For a deeper look at how an EV lease also affects HELP repayments and Medicare Levy Surcharge, see our EV Novated Lease HELP and MLS impact guide.

For planning around the announced April 2027 FBT changes, see EV Novated Lease FBT Changes From 1 April 2027.

Should families avoid EV salary packaging?

Not necessarily.

An EV can still be financially beneficial, but the CCS impact should be understood before decisions are made, particularly for families close to CCS income thresholds.

Ready to see your numbers?

If you salary package an eligible EV, FBT can be discounted or exempt — but your payroll may still report a Reportable Fringe Benefits Amount (RFBA). CCS uses ATI, and ATI can include RFBA.

Summary

Electric vehicles can be tax-effective, but the FBT discount does not automatically mean CCS neutrality.

If you salary package an EV and receive Child Care Subsidy, it is important to understand how reportable fringe benefits and adjusted taxable income may affect your CCS outcome.

Frequently Asked Questions

Does the EV FBT discount mean CCS won't be affected?

No. The discount reduces the tax cost of salary packaging an EV. However, it does not automatically exclude the benefit from all income-tested government payments. CCS assessment is separate and focuses on income reporting, not tax payable.

What is Reportable Fringe Benefits Amount (RFBA)?

A Reportable Fringe Benefits Amount (RFBA) is the grossed-up taxable value of certain fringe benefits reported by an employer. Even if the EV is FBT-exempt or discounted, the employer may still calculate the taxable value and apply the Type 2 gross-up factor (1.8868). RFBA is generally reported only where the total taxable value exceeds $2,000 for the FBT year.

How is CCS income assessed?

Child Care Subsidy is assessed by Services Australia using Adjusted Taxable Income (ATI). ATI includes taxable income, certain supplements and adjustments, and reportable fringe benefits. Because CCS uses ATI rather than taxable income alone, benefits that are tax-exempt or discounted can still affect CCS.

Does the CCS multiplier apply differently for different employers?

Yes. For employees of standard employers, the full RFBA is included in CCS ATI (multiplier of 1.00). For employees of Public Benevolent Institutions, public hospitals and qualifying charities (Section 57A employers), CCS uses a multiplier of 0.53 on the RFBA. This reduces the ATI impact but does not eliminate it.

Should I avoid EV salary packaging if I receive CCS?

Not necessarily. An EV can still be financially beneficial, but the CCS impact should be understood before decisions are made, particularly for families close to CCS income thresholds.

Are EV FBT rules changing from 1 April 2027?

The government has announced staged changes. From 1 April 2027, EVs at or below $75,000 are expected to keep the full FBT discount. EVs above $75,000 but below the applicable LCT threshold are expected to receive only a 25% discount on payable FBT. Existing leases are expected to be unaffected. These are announced settings — not yet final law. CCSChecker models the announced changes for planning purposes.

Official sources

• Joint ministerial media release — Fairer Tax Treatment to Encourage Affordable EVs
• ATO, FBT exemption for electric cars
• ATO, Reportable fringe benefits
• Services Australia, Child Care Subsidy income test

This is general guidance only. Report all changes (income, relationship, care arrangements) promptly via myGov. For personalised advice, contact Services Australia at 136 150 or visit servicesaustralia.gov.au/child-care-subsidy.

This information is general in nature and does not take into account your personal circumstances. Child Care Subsidy is assessed by Services Australia based on adjusted taxable income and other factors. You should confirm your situation with Services Australia or the Australian Taxation Office, or obtain independent advice.