Save health, and tax, with a salary-sacrificed e-bike

Salary sacrificing a “company car” is a popular option, however you may not be aware that there is also a tax and health incentive with another particular set of wheels — an electrically assisted bicycle (e-bike).

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 driver’s licence.

Where an employer enters into a lease with the bike company and the employer provides the use of an e-bike to an employee under a salary sacrifice arrangement, there is no FBT (according to a recently issued class ruling from the Tax Office).

A requirement is placed on how the e-bike is used (see below) and also 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 you usually have the option to take possession once you make a balloon payment.

The beauty for the employee under these arrangements is that it simultaneously helps keep the pulse rate up but the tax rate down.

Why it works

Very broadly, a car benefit as described in the FBT rules will only arise where a “car” has been provided to an employee for their private use. The class ruling makes it clear that the type of motor used for propulsion is not a factor, but the classification of the vehicle itself is (car or bike). So a car fringe benefit will not arise from an employee’s use of an e-bike simply because the e-bike is not a “car” for FBT purposes.

What about other “benefit” categories?

Under these arrangements, 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. In other words, no property has been received by the employee.

The benefit falls within the “residual benefit” category – which is a “catch-all” for fringe benefits provided. The Tax Office says that 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.