Another hit for EV drivers as popular $13,000 tax break is under fire

Yahoo

24-04-2025

Electric vehicle (EV) groups are furious over Peter Dutton's backflip on removing the fringe benefits tax (FBT) for new-age cars. The Opposition leader said earlier this week the Coalition wouldn't get rid of the generous handout for Aussies buying an EV.
But two days later, the Liberal party leader said the multi-million dollar Labor scheme would be dropped if he won the May 3 election. The rebate allows drivers to deduct the cost of an electric vehicle from fringe benefits tax if it was bought through a novated lease and does not exceed the value of $91,387.
Sydney Tesla driver Tom Gao bought his 2025 Model Y Juniper thanks to the FBT exemption and told Yahoo Finance the policy was a big factor in his purchase.
"I would not be buying an EV if FBT exemption is removed," he said.
Electric Vehicle Council CEO Julie Delvecchio was "extremely disappointed and confused" Australians could lose important financial assistance that allowed them to reduce ongoing costs by purchasing an electric vehicle.
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'The FBT exemption is incredibly popular among Australians living in the outer suburbs and helping many Australians across the country afford and manage the upfront cost of an EV, which we know is cheaper to run once you're behind the wheel," Delvecchio said.
'If the Coalition wants to make cars cheaper, and driving cheaper during a cost-of-living crisis, it wouldn't be removing this discount for Australians.'
Gao said he feared there would be a "significant drop in EV purchases" if the scheme was scrapped.
"If you look at uptake of EVs in countries like Norway, it's completely driven by government incentives," the Sydney driver said.
"That's the case across the world."Australians can shave thousands of dollars off the cost of an electric vehicle using the rebate.
The program, which was introduced by the Albanese government in 2022, had been extended to cover plug-in hybrid electric vehicles, but that exemption ended up April 1.
Now, you can deduct the cost of an electric vehicle if:
the EV was worth less than $91,387
the car was bought with a novated lease
A novated lease allows an employee to buy a new or used car and have their employer cover the cost of lease repayments to an agreed financial supplier.
The employer makes the repayments to the leasing company out of the employee's pre-tax salary in a salary sacrifice arrangement, which reduces the employee's taxable income.
For example, if a worker secured a $68,000 EV through a novated lease through their company, they could save around $13,296 thanks to the exemption.
Treasury forecast the policy would cost taxpayers $55 million in the 2024-25 financial year.
But recent figures from the Institute of Public Accountants found it cost closer to $560 million per year.
Drivers of traditional petrol or diesel fuel, an internal combustion engine vehicle (ICE), have claimed electric vehicle drivers are given unfair cost advantages.
Gao said he found the policy generous and had predicted it to be short-lived.
"If you look at the numbers, it's so outrageous in terms of incentives towards EV owners," he said.
"To some degree, I think it's extremely unfair for ICE owners."
During the election campaign, the Coalition had advised the tax exemption was too costly to continue.
However, on Monday Dutton said: 'No... We don't have any proposals to change those settings."
Cut to Wednesday and the tune was a little different.
'The Coalition will … unwind Labor's taxpayer-funded and badly designed electric car subsidies, saving upwards of $3 billion over the forward estimates and $23 billion over the medium term,' his campaign said in a statement.
The Australian reported that Dutton may have misheard the original question on Monday.
But it didn't stop Labor from sinking its teeth into the backflip.
'The Coalition is a risky and reckless bin fire of inconsistency and incompetence on the economy,' Treasurer Jim Chalmers said.
'This is what happens when they spend three years doing everything they can to avoid coming clean on their cuts. Every day a new, more embarrassing combination of Coalition cuts and chaos.'
National Automotive Leasing and Salary Packaging Association (NALSPA) CEO Rohan Martin said the Coalition's backflip "would disproportionately affect average working Australians" at a time when the "cost-of-living crisis, including escalating transport costs, is hitting hard".
It has called on the Coalition to rethink its stance.
"Such a winding back doesn't align with the Coalition's own election pledges—like tax relief through an offset, scrapping the New Vehicle Efficiency Standard penalties to lower upfront car costs, and halving the fuel excise—because the EV FBT exemption successfully delivers on all those fronts."
The Coalition has promised slash the fuel excise from 50 cents to 25 cents per litre for 12 months, if elected, to bring down the cost of petrol.
The cost of fuel has decreased recently as US President Donald Trump's ongoing tariff war created instability in the global oil markets.
The New Vehicle Efficiency Standard was introduced earlier this year and it gives every car manufacturer a CO2 target that they either have to meet or beat each year, otherwise they could be penalised.
The opposition wants to get rid of those penalties so that car manufacturers aren't reprimanded if they don't roll out fuel-efficient vehicles.Sign in to access your portfolio