Electric Vehicles, FBT and Child Care Subsidy (CCS)

Electric vehicles (EVs) are increasingly salary packaged because they can be 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 be exempt from FBT
• Even where no FBT is payable, 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.

Estimate the CCS impact in seconds

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

EV FBT exemption explained

Under Australian tax law, certain electric vehicles provided by an employer are exempt from Fringe Benefits Tax. This exemption can apply to the car and associated running costs when eligibility conditions are met.

The exemption reduces the tax cost of salary packaging an EV.
However, it does not automatically exclude the benefit from all income-tested government payments.

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 FBT on electric vehicles if over the $2,000 threshold per person), reportable super contributions, and certain other amounts, minus child support paid. For the full official formula and 2025-26 thresholds, refer to servicesaustralia.gov.au/child-care-subsidy/income-test.

Reportable Fringe Benefits and EVs

A Reportable Fringe Benefits Amount (RFBA) is the 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
• 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 added to your ATI is $28,302 ($15,000 x 1.8868).

This means the ATI impact 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.

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
• EV benefit taxable value: $18,000
• After gross-up (x 1.8868): RFBA of approximately $33,962

ATI calculation

• Taxable income: $155,000
• Plus RFBA: $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.

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
• 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 impact guide.

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 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 FBT exemption 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 EV FBT exemption mean CCS won't be affected?

No. The exemption 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, 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, some benefits that are tax-exempt can still affect CCS.

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.

Official sources

• 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.