Dutton reverses pledge on EV tax break two days after saying he would keep it

The Coalition has staged a dramatic backflip over a $3 billion tax break for motorists who buy electric vehicles, revealing it would halt the scheme just two days after Opposition Leader Peter Dutton said it would go ahead.

The move stunned the car industry by committing a Coalition government to saving $3 billion over four years by ending the tax breaks for new vehicle buyers even though Dutton gave a clear “no” on Monday when asked if he would repeal the Labor scheme.

Almost 100,000 customers have taken advantage of the fringe benefits tax incentives since it came into force three years ago, while the government is pledging to continue the scheme as part of a broader goal to reduce greenhouse gas emissions.

Opposition Leader Peter Dutton at a petrol pump photo opportunity in Perth on Wednesday. Credit: James Brickwood

The scheme scraps the fringe benefits tax charged for cars provided to employees through salary sacrifice or as a company car for personal use if the car is electric. Hybrids are not eligible.

While the Coalition voted against the tax breaks in 2022 and has criticised the scheme since, Dutton took a different approach on Monday when asked at a press conference if he would ditch it.

Would a Coalition government repeal the EV tax break, a journalist asked him at a campaign stop in the electorate of Dunkley in south-east Melbourne.

“No, we’ve said that what we’re opposed to is the government’s big tax on hybrids,” Dutton replied, arguing that a separate Labor policy on fuel emission standards had increased the cost of vehicles.

“We don’t have any proposals to change those settings otherwise,” he said.

His comments on Monday led to headlines about his pledge to keep the EV incentives in place, prompting two industry groups, the National Automotive Leasing and Salary Packaging Association (NALSPA) and the Electric Vehicle Council, to welcome his position because it meant bipartisan support for the scheme.

NALSPA chief executive Rohan Martin issued a statement at 4.21pm on Wednesday to say the opposition leader’s commitment meant there was certainty for families.

Soon afterwards, at 4.30pm on Wednesday, the Coalition campaign headquarters issued a statement on budget savings that included a $3 billion saving from repealing the EV incentive, in a deliberate backflip from the leader’s remarks two days earlier.

“We are banking the saving,” a Coalition source said when asked about the policy reversal.

The policy, aimed at boosting the take-up of EVs, was initially budgeted to cost just $55 million a year on forecasts about the number of motorists who would take up the benefits and, in doing so, reduce the fringe benefits taxes paid to the Commonwealth.

But in March, the Australian Financial Review revealed it was costing about $560 million annually because so many buyers took up the incentive by leasing EVs.

Dutton’s commitment on Monday led the Australian Financial Review to report that he had vowed to keep the tax break he had once opposed, while The Australian said he was keeping the tax incentives in a “backflip” from his previous stance.

The statement on Wednesday returns Dutton to the position he had when the tax breaks passed the parliament in 2022 with support from Labor and the Greens, against the objections from Liberals and Nationals.

Opposition Leader Peter Dutton visited another petrol station on Monday, this time in the electorate of Dunkley.Credit: James Brickwood

The Coalition revealed the $3 billion budget saving from the halt to the EV scheme in a press statement that warned of pressure on the federal budget in light of a new report from the International Monetary Fund downgrading global growth.

Shadow treasurer Angus Taylor and finance spokeswoman Jane Hume listed Coalition savings such as dismantling the $20 billion Housing Australia Future Fund and stopping the $20 billion Rewiring the Nation scheme to build new transmission lines.

“In this uncertain environment, a prospective government must make serious decisions to fix the budget and protect Australia from future shocks,” they said.

“As part of its commitment to strong economic management, the Coalition will make tough decisions to ensure we can lower inflation and secure the essential services our nation needs.”

The Coalition savings also included a halt to $14 billion in production tax credits for mining and not proceeding with a $16 billion Labor pledge to write off student debts.

As well, the statement said the Coalition would “unwind Labor’s taxpayer-funded and badly designed electric car subsidies, saving upwards of $3 billion over the forward estimates and $23 billion over the medium term”.

On Wednesday, Dutton made his 13th campaign visit to a petrol station to promote his plan for a temporary fuel excise cut, this time in Perth’s outer northern suburbs.

EV Council chief executive Julie Delvecchio said the EV tax exemption was very popular among Australians in the outer suburbs because it saved money on fuel.

“If the Coalition is indeed scrapping the [fringe benefits tax] exemption, after the opposition leader just days ago indicated he didn’t have any proposals to change it, then we are extremely disappointed and confused by this backflip,” she said.

“If the Coalition wants to make cars cheaper, and driving cheaper during a cost-of-living crisis, it wouldn’t be removing this discount for Australians.”

The sudden policy change is the Coalition’s second major about-face of the campaign after Dutton retreated on his strong criticism of working from home.

“The Coalition is a risky and reckless bin fire of inconsistency and incompetence on the economy,” said Treasurer Jim Chalmers.

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