Tax Cuts Are Now Coming for New Electric Vehicles Sold in Australia, but There’s a Catch

Tax Cuts Are Now Coming for New Electric Vehicles Sold in Australia, but There’s a Catch

The Australian government’s Bill that reduced the costs of electric vehicles for employers has passed through the Senate. As you may have noticed, this is a move that reduces purchases made for business reasons, not your average consumer. It’s one of a few electric vehicle policies being pursued by the government.

The proposal passed with 31 votes against 24 after a deal was struck between the Greens, Labor and independent David Pocock. A change to the Bill brought on by the deal meant that plug-in hybrids would be included in the tax cuts up until April 2025.

What is the electric car discount bill?

The Bill, the Treasury Laws Amendment (Electric Car Discount) Bill 2022, includes changes to the Fringe Benefits Tax Assessment Act 1986 Bill.

The specific amendment? Making electric cars, hydrogen cars and plug-in hybrids below the luxury car tax threshold exempt from the fringe benefits tax, slashing costs for employers and allowing them to provide EVs to employees at a much cheaper cost.

Employers could save up to $12,500 on the purchase of an EV for an employee, while individuals could save up to $4,300, according to Treasury estimates and as reported by AAP.

“Both battery-electric and plug-in hybrid electric vehicles, up to a total cost of $84,916, are eligible for this incentive,” the Electric Vehicle Council says on its website.

“The electric car discount program could save you $3,000 to $5,000 per annum.”

The Electric Vehicle Council has also noted that this legislation will have roll-on effects, in that it’ll improve the second-hand EV market.

A provision of the Bill is that it will be reviewed in three years, to ensure it remains effective.

Additionally, the government plans to remove the 5 per cent import tariff for select electric vehicles, but that’s not being covered by the Electric Car Discount Bill. We’ll likely see that developed later on.

What else is on Labor’s electric vehicle policy agenda?

This Bill isn’t the only policy the government is pursuing on electric vehicle uptake. One of its big plans is a national charging network plan.

Labor’s national charging network plan

Dubbed “Driving the Nation”, Labor’s electric vehicle policy involves a $500 million investment in a national EV charging network. This is twice the amount that the former Parliament, the Coalition (Liberal and National Parties), previously committed to a national EV charging network, with Labor arguing that only 10 per cent of the government’s commitment has been fulfilled. Labor says that this fund will allow for co-investment in additional EV chargers, along with hydrogen and biofuel infrastructure.

For electric vehicles, however, a more in-depth approach has been put forward by the new government. The plan is to build charging stations at an interval of 150 kilometres on major roads across Australia. It’ll involve partnerships with state, territory and local governments, along with industry partners. Labor says it will commit $39.3 million to this plan, adding that this investment will be matched by the NRMA (who operate a charging network across Australia).

In particular, the government wants to fill major gaps in Australia’s electric vehicle charging network, such as from Adelaide to Perth (across the Nullarbor), Darwin to Broome and then to Perth, Broken Hill to Adelaide, Port Augusta to Darwin and Brisbane to Mt. Isa and then to Tennant Creek.

Earlier this year, the New South Wales government announced a massive fast-charging EV network plan for the state, and up until now, the states have been leading the charge on EV uptake.

“Labor will continue to deliver the Driving the Nation Fund through the Australian Renewable Energy Agency, and will coordinate public investment to ensure that it does not duplicate or crowd out private efforts,” said then-Shadow Minister for Climate Change and Energy Chris Bowen in May. Bowen is now the Minister for Climate Change and Energy and in addition to this Bill, he’s also introduced the Climate Change Bill 2022, which is now law.

“The future of road transport is hydrogen and electric. But to take advantage of the future, we have to prepare for it now,” added Shadow Minister for Infrastructure, Transport and Regional Development Catherine King, noting the plan is to work “collaboratively” with state and territory governments to “build a cleaner, cheaper road network”.

Interestingly, in the lead-up to the election, Labor also put forward an $80 million fund for a national “Hydrogen Highways” refuelling network. Hydrogen-powered vehicles aren’t that popular internationally, as there’s only a few cars available in regions where it’s viable to own and fuel one.

That’s pretty much it for the government’s electric vehicle policy

While the government does plan on developing a national electric vehicle strategy (with submissions closed on the matter), These are the only policies that the federal government is putting forward at the time of writing. The exemption of the fringe benefits tax hardly benefits anyone except for employers and businesses, and although it makes the prospect of electric company cars in Australia more attractive, it doesn’t address any of the fundamental problems with electric vehicles in Australia.

The national electric vehicle charging station plan, however, does address quite a fundamental problem with EVs right now: chargers aren’t especially common across Australia, so Labor’s policy and government support is very welcome.

But the federal government still doesn’t have an answer to state-level rebates and incentives, which are currently doing quite a lot in supporting EV uptake at the state level. Even with these incentives though, it’s still very expensive to buy a new EV in Australia, with new cars costing upwards of $40,000.

Fuel efficiency standards are widely considered to be important for EV development and uptake, however, Australia doesn’t have any. There are also no plans, at the time of writing, to develop any.

The future is electric.

This article has been updated since it was originally published.

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