Electric cars to be cheaper as Greens, government agree on tax cut: Here’s what you will save

Cheaper electric cars on the horizon for Aussies as the government finally makes a deal to cut vehicle taxes – here’s how much you will save

  • Albanese government has made a deal with Greens prioritising fully electric cars
  • Includes plans to cut fringe benefits tax, buyers exempt from import tariffs 
  • Replacing plug-in hybrid cars for fully electric save govt $1billion over a decade
  • Changes to start April 2025 with plan to phase out petrol-based plug-in hybrids
  • Looking to include household charging technology in green vehicle packages
  • Greens ‘fast tracking electric vehicles’ to go ‘further and faster on climate’

The Greens have secured a deal with the Albanese government which would prioritise fully electric vehicles over hybrids and electrify the Commonwealth fleet. 

The government plans to cut fringe benefits tax on low-emission vehicles to encourage fleet owners and employers to replace petrol vehicles with greener alternatives.

But the laws were set to be blocked by the crossbench in the Senate because they effectively backed plug-in hybrid vehicles with petrol engines.

The changes, if passed, could cut the price of some electric vehicles by $4700 for individuals or up to $9000 for businesses. Savings would be backdated to July.

The tax cuts would apply to battery electric, hydrogen fuel cell and plug-in hybrid vehicles. 

The new deal will see fully electric vehicles prioritised over petrol-based plug-in hybrids

The new deal will see fully electric vehicles prioritised over petrol-based plug-in hybrids 

Greens leader Adam Bandt said on Tuesday his party had reached a deal with Labor to prioritise electric vehicles over plug-in hybrids that rely on petrol. 

Mr Bandt encouraged the switch to fully electric vehicles because the plug-in hybrids continued the use of fossil fuels. 

The Greens secured a deal with the Labor government that will cut taxes and emissions

The Greens secured a deal with the Labor government that will cut taxes and emissions

Replacing plug-in hybrid vehicles would save the government $1billion over a decade, a Parliamentary Budget Office found.

The deal would make eligible vehicles exempt from import tariffs, in turn lowering the retail price for all buyers.

It would also mean that customers would not have to pay fringe benefits tax which will make the cars cheaper to include in staff salary packages for employers.

To be eligible, the vehicle must cost less than the threshold for the luxury car tax, which is currently $71,849 for most cars but $84,916 for fuel-efficient and zero-emission vehicles.

This includes models like the Tesla Model 3, Tesla Model Y, the Nissan Leaf and the Volvo XC40 Recharge Pure Electric.  

Teslas (pictured) are still classified as luxury cars which mean they are not eligible for the tax break

Teslas (pictured) are still classified as luxury cars which mean they are not eligible for the tax break

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The changes will see the phasing out of support for petrol-based plug-in hybrids on April 1, 2025, and prioritising zero-emission electric vehicles in the government fleet procurement policy, by removing plug-in hybrid vehicles except in exceptional circumstances.

The tax office will also issue guidance on when household charging technology is able to be included within FBT-exempt vehicle packages.

‘The Greens have fast-tracked electric vehicles,’ Mr Bandt said.

‘The government fleet will go electric, and when these cars are sold second hand, it will help bring the cost down of EVs for everyday people.’

He said it showed the government could be pushed into going ‘further and faster on climate’. 

Greens Senator Sarah Hanson-Young said the government should use the two-year window for phasing out plug-in hybrid support to roll out more charging stations to speed up Australia’s transition.

‘The government needs to come to the party with the other policy measures needed to ensure people have the opportunity to charge, to recharge and to afford that infrastructure,’ she said.

‘That’s now the government’s job and we look forward to seeing some better results and some more policy ahead of the next budget.’

Greens Senator Sarah Hanson-Young said Australia needed to get more spots for people to charge their electric vehicles

Greens Senator Sarah Hanson-Young said Australia needed to get more spots for people to charge their electric vehicles

Senator David Pocock said it was important to cut the price of electric cars but he did not want to see the second-hand market flooded with hybrid vehicles still using petrol engines.

‘My position is that plug-in-hybrids are a fossil fuel technology that should not be subsidised by taxpayers in this bill,’ he said.

‘This bill provides tax incentives to mostly wealthier Australians through fleet vehicles, which will create a much-needed second-hand EV market in a few years’ time.’

Senator Pocock said he hoped more Australians would be able to afford electric vehicles as a result of the discount and access ‘much lower fuel costs, lower maintenance costs and a better driving experience’.

Good Car Company co-founder Anthony Broese van Groenou, who operates a second-hand marketplace for electric vehicles, welcomed the tax cuts but said including plug-in hybrid cars in discounts was short-sighted.

Mr Broese van Groenou said lab-based research had overstated their green credentials.

‘In the real world people don’t use them like they’re meant to be used,’ he said.

‘A lot of people get the car to get a subsidy and then they just drive them like a petrol car or they forget to plug in.

‘You’ve also got the worst of both worlds: you’ve got a half-electric, half-petrol car and the performance aspect of both is limited.’

Plug-in hybrid vehicle sales in Australia have been low to date, with Federal Chamber of Automotive Industries figure showing battery electric vehicles outselling plug-in and standard hybrid vehicles combined in October.

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