Save tax (and health) with a salary-sacrificed e-bike

Entering into a remuneration package to secure a vehicle through a salary sacrifice arrangement is a popular option offered to employees (see more on novated leases here). However the ATO has issued a ruling on another particular set of wheels that opens up both a tax and health incentive. 

Clients may be in a position to consider channelling their inner “mamil” (middle aged men in lycra) and package up an electrically assisted bicycle (e-bike) instead.

The ATO’s class ruling states that where an employer enters into a lease with an e-bike* company and consequently provides the use of the e-bike to a staff member under a salary sacrifice arrangement, there is no FBT .

The only caveat really is that the e-bike must always be the property of the bike company and at the end of the term of the lease the e-bike must go back. This is unlike most car novated leases, where the employee usually has the option to take possession once the boss makes a final balloon payment.

The beauty for the employee in providing an e-bike under these arrangements is that it simultaneously helps keep the pulse rate up but the tax rate down.

Why it works

A car benefit as described in the FBT rules will only arise for a “car”. It will not arise from an employee’s use of an e-bike simply because the e-bike is not a car. And a property fringe benefit will not arise from an employee’s use of an e-bike as the ownership of the bike is retained by the bike company.

The benefit falls within the “residual benefit” category – which is a “catch-all” for fringe benefits provided. The use of the e-bike however will be exempt as long as private use is restricted to travel to and from work, its use is incidental to work duties, or there is minor and infrequent non-work use.

Therefore, there will be no FBT liability to the employer in providing e-bikes in this manner.

The local arrangement has similarities, but is different, to Britain’s “Cyclescheme”, which allows employers to provide discounted bicycles, including “electrically assisted pedal cycles”, to employees as a tax-free benefit.

Of course the ancillary “real” benefits include reducing carbon emissions, easing traffic congestion, lessening demand on infrastructure, encouraging more modes of transport and actively promoting a healthy lifestyle with flow-on benefits to the general cost of health care.

Aside from being FBT free, it’s a win for participating businesses in developing a cycle-centric workplace, with flow on benefits of a healthier workforce, greater social interaction, team and morale building and invigorating the workplace.

 *An e-bike is defined as a bicycle-like frame fitted with an electric motor, which provides support when the rider is actively pedalling — the rider therefore is still getting exercise, but the effort is supported by battery power. As with unpowered bicycles, there is no requirement for registration or a drivers licence.