Greens cut deal to lower costs of battery electrics, but not fossil hybrids

Federal government legislation proposing to exempt a range of low emissions vehicles from the fringe benefits tax looks set to prioritise battery electric vehicles, after a deal was struck between Labor, the Greens and independent senator David Pocock.

Greens leader Adam Bandt says his party has come to an agreement to make changes to the Treasury Laws Amendment (Electric Car Discount) Bill 2022 to increase support for zero emissions EVs and limit funding to petrol powered hybrids.

A formal vote on the amended bill is likely to take place either later on Tuesday, or later this week. Bandt says that the government needs the Greens’ votes in the Senate to pass the bill.

In its original form, the bill proposes tax exemptions for battery electric, hydrogen fuel cell and plug-in hybrid cars worth under $84,916, and made available for the private use of an employee or an associate of the employee by their employer.

A fringe benefit is something extra an employee gets from their employer on top of their usual wage, and the employer is responsible for covering the tax on those extra benefits each year.

Removing the tax would mean deliver savings on an EV valued at about $50,000 – of which treasurer Jim Chalmers has conceded there are few in Australia, at least for now – of up to $9000 a year per car for companies.

This could be a big booster to EV sales – a recent survey found that some 40 per cent of small and medium businesses would buy an EV within the year if the Electric Vehicle Discount Bill passes into law.

Another fossil fuel subsidy?

The Treasury Laws Amendment (Electric Car Discount) Bill 2022 was introduced to Parliament in late July but has been held up by the Greens and Pocock, who argue that only zero-emissions vehicles should be exempted from the tax.

Both the Greens and Pocock contend that including plug-in hybrids in the policy amounts to a new fossil fuel subsidy, considering these vehicles still use petrol.

“Australian governments already spend $11.6 billion a year of public money to subsidise the burning of coal, oil and gas,” the Greens said in their submission to the Senate Economics Legislation Committee on the legislation.

“It is the Australian Greens’ view that public money should not subsidise fossil fuels, and that money should instead be used to accelerate the uptake of electric vehicles.”

Greens and Teals flex their parliamentary muscle

In a statement on Tuesday, Bandt says that after weeks of negotiations the Albanese government has agreed to support changes to the bill that will limit the support for fossil fuelled plug-in hybrids.

According to Bandt, the changes agreed to include the “sunsetting” of support for plug-in hybrids by April 2025, and to remove PHEVs from the federal government fleet procurement policy, except in “exceptional circumstances.”

Bandt says the Australian Taxation Office is also expected to issue guidance on when household charging technology can be included within FBT-exempt vehicle packages – another of the Greens’ recommended changes to the Bill.

“The Greens have fast-tracked electric vehicles,” Bandt said.

“By limiting handouts to petrol cars and accelerating support for electric vehicles, the Greens in balance of power have pushed the government to go further and faster on climate.

“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.”

Senator Pocock is yet to make a formal statement on the deal ahead of the vote.

According to legal blog Lex, the Senate Economics Legislation Committee reported overall support for the Bill, alongside calls for it to be passed quickly given its potential role in making EVs more affordable and boosting uptake.

In a dissenting report, however, Lex reports that Coalition Senators said the bill should only be considered following the findings of the federal  government’s inquiry on the National Electric Vehicle Strategy.

The Coalition Senators also reportedly said that the $205 million in prospective tax cuts over the forward estimates should be redeployed to the best method of increasing EV uptake, which should include EV infrastructure.