EV buyers receive thousands in tax breaks

High income earners have been hardest hit by the Government’s decision to break its tax promise. But there is a way to get even.

High income earners looking to recoup the tax cuts promised, then wound back, by the Federal Government should buy themselves an electric vehicle.

The Government says that its EV discount, which waives the 47 per cent fringe benefits tax on electric vehicles provided through work for private use, can save employers up to $11,000 a year on a $50,000 car.

Employees can save up to $4700 a year, according to Government estimates.

The EV Discount, which the Government estimated would cost $345 million, was announced in the October 22 budget.

To be eligible for the exemption, cars need to cost less than the luxury car tax threshold of $89,332.

Tax breaks make a Model 3 cheaper than a Mazda CX-30 small SUV through a novated lease. Picture: Supplied.

The EV tax discounts can make a $67,000 Tesla Model 3 cheaper to lease than a Mazda3 Astina hatchback.

The tax break has been a key driver behind the surge in electric vehicle sales in 2023.

It also applies to plug-in hybrid vehicles, which can run for a short distance under electric power – usually between 50km and 80km – before switching to petrol.

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The Greens initially objected to the exemption for plug-in vehicles, arguing that it created a fossil fuel subsidy and would slow the transition to electric vehicles.

As a compromise, the FBT will only apply to plug-in vehicles bought before April 1, 2025.

EV sales rose by 160 per cent last year, largely thanks to generous state government incentives and the FBT exemption.

The Model Y was the top-selling vehicle in the country to private buyers. Picture: Thomas Wielecki

Sales of plug-in hybrids almost doubled as well.

“More and more households and businesses are saving thousands of dollars on the upfront and running costs of their vehicles – with our EV discount making leasing EVs and plug-in hybrids cheaper than leasing petrol vehicles in many circumstances,” Climate Change and Energy Minister, Chris Bowen, said last year.

Novated leasing company Maxxia is offering five-year leases of the Tesla Model 3 for $214 a week, while the much cheaper Mazda CX-30 costs $228 a week.

Climate Change and Energy Minister Chris Bowen said the tax breaks would make leasing EVs more attractive than petrol cars. Picture: NCA NewsWire/Gaye Gerard

Electric car buyers aren’t the only ones who benefit from FBT breaks on their work vehicles.

Businesses are exempt from paying fringe benefits tax when they provide a work ute to their employees.

The exemption can mean thousands of dollars in savings over a typical lease, making a $80,000 ute cheaper to lease than a $55,000 SUV.

There is a catch, though. The Australian Taxation Office has strict laws applying to private use of the vehicle, demanding that any private use is “limited”.

The Australian Taxation Office’s definition of “limited” use includes travel between home and work and non work travel that is “minor, infrequent and irregular”.

Trips to weekend footy and fishing spots, as well as camping holidays, are likely to land owners in trouble with the Australian Taxation Office.

Originally published as EV buyers receive thousands in tax breaks