Company Interview / Carly subscribers score a tax break

Key points:

ATO's new car subscription ruling exempts eligible EVs from fringe benefits taxChris Noone discusses Carly's (ASX: CL8) exclusive product to make EVs more affordableCarly's (ASX: CL8) EV trial offers consumers a chance to try electric cars before buying

The Australian Taxation Office (ATO) has released a product ruling addressing salary packaged car subscriptions, confirming that eligible electric vehicles priced below the luxury car tax threshold of just under $92,000 are exempt from fringe benefits tax when paid through a salary sacrifice arrangement for at least three months.

Chris Noone from Carly (ASX: CL8) states that the ruling is exclusive to Carly (ASX: CL8) and aims to make electric vehicle subscriptions more affordable. He highlights that consumers can save around 35% on subscription costs, including insurance, registration, and maintenance, making it a simpler way to trial electric vehicles.

Chris mentions that car owners are hesitant to switch to EVs due to high upfront costs and misinformation. Carly's (ASX: CL8) new product, EV trial, allows people to try an electric car for a month or more, helping them make informed decisions. He calls for more government support to facilitate EV trials over funding fast chargers.

Full unedited transcript below:

0:11

The Australian Taxation Office releasing a new product ruling specifically addressing salary packaged car subscriptions. The ruling confirming that eligible electric vehicles priced below the luxury car tax threshold of just under $92,000, are exempt from fringe benefits tax when paid through a salary sacrifice arrangement for at least three months. Now to discuss how Aussie businesses and car manufacturers could be affected. Car subscription company Carly CEO Chris Noone joins me now. Chris, just tell us what all this is about. Thanks for joining us. So yes, yesterday the ATO published the product ruling. It's actually exclusive to Carly. So no other car subscription firm can rely on this ruling. We applied for the ruling because we wanted to offer the benefit of the FPT exemption that's already available for innovative leases for electric vehicles, which are typically three years or more, and we wanted to make sure that it was available for shorter periods of time. So the

1:11

ATO ATO was agreed for our product to provide the FBT exemption for subscription periods of a minimum period of three months. So what does it mean then? Not only for you, but for everyday Aussie drivers as well?

1:27

Um, what it means for people who want to try an electric vehicle is that if they are able to salary package it, um, it will be a lot cheaper for them. So for someone on an annual salary of around $100,000, they'll save around 35% on the cost of the subscription compared to the normal retail price cost of that subscription. So that would be saving them for a entry level electric vehicle over $100 per week. And the subscription includes the insurance, the registration and the maintenance. Uh, for the vehicle So it's a it's a very simple way for drivers to get into electric vehicles, either to trial them before they buy an electric vehicle or for the medium term. Yeah, $100 a week is a big saving in this cost of living crisis, Chris. But we are seeing that car owners are a little bit cautious about transitioning to EVs. Why do you think this is, and do you think this could potentially change that?

2:26

I think it's a massive concern with people at the moment. It's a lot to expect people to pay upwards of $40,000 to try a new technology. It's okay if you're buying a new phone or a new computer or something like that, but a vehicle is something that you hold on to for a number of years. And if you make the wrong decision, it can be a decision you'll regret for a long period of time. And it can have a big financial impact. So we've actually launched a product called EV trial, which allows people to trial an electric vehicle for a month or more so that they can understand whether it really meets their needs. There's lots of coverage in the press at the moment about electric vehicles some factual, some not, some positive, some negative. And we really think the consumers are actually confused. We think the best way to move beyond that confusion is to let them try a vehicle and see how it works in with their own commuting, lifestyle, holidays, business purposes, see how it charges

3:25

at home, see what the public charging infrastructure is like. So at the end of that period, they can actually make a confident decision whether they want to buy an EV or take out an overheated lease, or whether they might opt for a hybrid or stay with an internal combustion engine vehicle. Yeah, and that raises a lot of points in terms of what it's going to take and how long potentially it might take for consumers to adopt EVs more regularly. I assume just the ease in, in terms of being able to charge them. Is that a key factor too?

3:58

That's right. But I think there's also a lot of misinformation in the market about that. The fact is that most people charge their vehicle at home, and it's done using a standard PowerPoint or a very low cost charger. So a lot of the media coverage is about the lack of public charging infrastructure, but the majority of people don't use the fast chargers that are available publicly most of the time. So we think that a lot of people are being deterred from moving into electric vehicles because of this fear, and the fear cannot be overcome until they've actually tried it for themselves. And unless they're trialing a car through a service like our own, the only way for them to find out whether an EV works for them is to actually go and purchase one. And we think that a much more emphasis should be placed on people being able to trial the vehicles before they buy them. Try before you buy. That was a slogan at some point, wasn't it, Chris? Um, do you think that this is a positive step though, what the ATO is doing and if so,

4:58

or if not, what more could be done Look, it's really positive for us. This is what we asked the ATO to approve. So we really think it is the right step, um, to move forward. But we think, you know, if the government wants to support the growth of electric vehicles, they shouldn't put all of the emphasis on funding fast charging. We think they should put the emphasis also onto helping people have these trial opportunities and building their confidence, uh, in the electric vehicle infrastructure, because no one's going to know if the fast charge is there unless they've actually already bought an electric vehicle. Now, Chris, we've just finished, um, the reporting season. Tell us, I guess, about your quarterly activities report that you posted to the ASX. Well, we've released our, uh, interim accounts. Uh, so over the year, our subscription revenue grew by 75%, and that's off a fleet growth of 69%.

5:58

And we've been growing both our asset heavy fleet, which is the the fleet that we own and also our asset light fleet, which is where we source vehicles from automotive manufacturers and dealers and monetize them on their behalf. So we're seeing great growth in both sides of the fleet. And the demand for us has been coming from both consumer markets and also corporate market and more recently in the last few months. Um, the interest in electric vehicles has been increasing as well. So a strong uplift in subscription revenue. What's your forecast for the remainder of the reporting period? And I guess the outlook as well for full year 25. Well, the outlook for us is very much focusing a lot more on the electric vehicle opportunities. We still do maintain a fairly large internal combustion engine fleet, because that's where the majority of the demand is now. But we've got our eyes on where the market is moving, and we'll be adjusting our fleet composition accordingly. Um, we think that this

6:58

salary package, uh, product will be very popular and that will be a very strong source of revenue for us in the future.