The Albanese government has made good on its promise to make electric vehicle tax cuts one of the first orders of business for the 47th Parliament, with the introduction of legislation on Wednesday it says will drive EV uptake in Australia and cut transport emissions.
On the first sitting day of Parliament for the new federal government, Treasurer Jim Chalmers followed up the introduction of Labor’s Climate Bill with legislation to amend the Fringe Benefits Tax Assessment Act to exempt zero or low emission vehicles, including eligible plug-in hybrid models.
Chalmers says the legislation, which will apply to eligible cars from one July 2020, will – if passed – exempt them from the Fringe Benefit Tax (FBT).
To be eligible for the tax exemption, the cars must have a first retail price below the luxury car tax threshold for fuel efficient cars ($84,916 for 2022-23) first made available for use on or after 1 July 2022.
Chalmers told Parliament that this meant an EV valued at about $50,000 – of which he later concedes there are very few in Australia – and provided by an employer through this arrangement will save the employer up to $9000 a year.
For employees using a salary sacrifice arrangement to pay for an EV at that same price, the savings would be up to $4700 a year, the Treasurer said.
Chalmers said in a written statement on the new Bill that its goal was to reduce the upfront and ownership cost of electric vehicles, addressing a significant barrier to their uptake.
In Parliament he added that it would also increase the number of secondhand electric vehicles on the market – thanks to the high turnover rate of fleet cars – and provide more EV options for consumers in coming years.
“This Electric Car Discount Bill today sends an unmistakable signal to this parliament, to Australian industry, and to the Australian people and beyond, that Australia now has a government which understands the economics of cleaner and cheaper and more reliable energy and recognises the generational imperative that we have to act on climate change,” Chalmers said.
“The bill I introduced today is also about grabbing these opportunities. It implements the Albanese government’s election commitment to provide a fringe benefits tax exemption for eligible electric cars that are made available by employers for employees.
“The package aims to help ensure and encourage greater take up of electric vehicles and reduce our transport emissions as part of the government’s broader climate agenda.
“These measures help reduce the upfront and ownership costs of electric cars addressing a significant barrier to buying them in Australia. It’s one of the first new initiatives in the government’s plan to improve electric vehicle uptake.”
Labor continues to stay quiet on the subject of the introduction of a vehicle fuel emissions standard, which is broadly considered to be the strongest policy signal a government can send that it is serious about decarbonising the transport sector.
Chalmers did say, however, that the government would “have more to say” about further measures to be delivered as part of the promised National Electric Vehicle strategy, which broadly targets 89% of new cars sales to be electric by 2030, and 15% of all vehicles on the road.
Already committed measures to help achieve these targets include a $500 million investment to boost national charging infrastructure and a target for 75% of new Commonwealth government fleet purchases to be electric by 2025.
The Electric Car discount legislation introduced on Wednesday also includes the removal of a 5% tariff for eligible electric cars with a customs value below that luxury car tax threshold for fuel efficient vehicles.
Although as The Driven pointed out here, this particular tax cut is less significant considering some of the key global exporters of EVs, namely China, already have a free trade agreement in place with Australia.
“This bill is good for motorists. It’s good for employers. It’s good for workers and it’s good for climate action,” Chalmers said. “Full details of the fringe benefit tax exemption measure are contained in the explanatory memorandum that I commend this bill to the House.”
Sophie is editor of One Step Off The Grid and deputy editor of its sister site, Renew Economy. Sophie has been writing about clean energy for more than a decade.