Labor discount plan to bring down cost of electric cars to take effect on July 1

Some electric vehicle models should become cheaper from July 1, with the Albanese government confirming it will honour a promise to provide exemptions from certain federal taxes from the start of that month.

The Driven has confirmed that the Albanese government intends to fulfil its promised “Electric Vehicle Discount” policy, which will provide exemptions to certain import tariffs and fringe benefits taxes, with effect from 1 July 2022.

The import tariff levies a 5 per cent tax on cars brought to Australia from overseas manufacturers, adding thousands to the cost of a new vehicle.

The import tariff exemption won’t benefit all electric vehicle models, as car imports from several countries are already exempt under free-trade agreements, but it should help cut the cost of vehicles imported from Japan, South Korea and most of Europe.

This would see the import tariff lifted on vehicles like the Nissan Leaf, the Mercedes EQA, the Hyundai Kona EV, and the Mini Cooper SE.

The fringe benefits tax applies to vehicles provided by employers for their employees’ personal use and attracts a 47 per cent tax rate on the financial benefit of the arrangement.

Labor said that the fringe benefits tax exemption could cut the effective cost of electric vehicles by as much as $12,000 – and should have flow-on benefits for the second-hand EV market.

Both exemptions will apply to electric vehicles with a sale price below the luxury car tax threshold for fuel-efficient vehicles, which sat at $77,565 in 2020-21.

Labor said the threshold would help reduce the cost of cheaper electric vehicle models and encourage manufacturers to bring more lower-cost EVs to The Australian market.

Before the election, Labor had promised that the measures would take effect from July 1, 2022 – to be reviewed after three years.

This would see the discount apply to new EV purchases before the new federal parliament convenes for the first time – but the passage of legislation with retrospective effect – which is often the case with tax measures – will allow the federal government to avoid any delay in its effective implementation.

A similar arrangement was followed by the NSW Government when it introduced its $3,000 rebate for the purchase of new electric vehicles and a waiver of stamp duty fees, with legislation being passed by the state parliament after the incentives took effect.

The federal ‘electric vehicle discount’ policy would likely be included in a package of measures in the Albanese government’s first federal budget, scheduled to be handed down in late October.