Electric vehicle buyers to save thousands through FBT exemption

New legislation will slash the cost of salary-packaged electric vehicles, making them cheaper than their petrol alternatives in some cases.

New legislation slashing the cost of salary-packaged electric vehicles is expected to pass through the Senate in the next fortnight, after the Government reached a deal with the Greens and independent Senator David Pocock.

Leasing experts predict the legislation, which waives the fringe benefits tax on company leases for electric vehicles, could save buyers more than $20,000 over the term of a typical four-year lease on a Tesla Model 3.

National Automotive Leasing and Salary Packaging Association secretary Rohan Martin said the implications of the legislation still needed to be thrashed out, but the end result would be EVs will be as cheap as their petrol equivalents over the term of a novated lease.

Cars such as the Hyundai Ioniq 5 could be much cheaper when new FBT legislation passes. Picture: Thomas Wielecki

“The Treasurer has been quoted as saying that in a salary packaging arrangement this will save up to $4700 per year,” Mr Martin said.

“Over the running life of the asset, or the lease term, that would in most cases at least deliver price parity,” he said.

In some cases it would make an EV “cheaper to own and operate” than an equivalent petrol vehicle.

“On a Tesla Model 3, at a driveaway price of about $68,000 over four years with a car doing 15,000km a year, that’s a saving of about $21,000,” Mr Martin said.

He said the legislation would increase demand for new electric vehicles.

“We’re looking forward to it having an impact in terms of the demand and interest in battery electric vehicles. What that ultimate level will be, time will tell, because it also depends on supply as well,” he said.

Cars such as the Tesla Model Y are likely to be in big demand. Picture: Thomas Wielecki

The car industry has been plagued by supply issues since Covid struck, and stock shortages are particularly severe for electric vehicles.

Some have waiting lists of several years.

Mr Martin said the legislation would eventually see more second-hand EVs on the market, improving affordability.

“You will see a greater flow-on effect of seeing more battery electric vehicles in the second-hand market,” he said.

The Greens and Mr Pocock had initially baulked at the Government’s plan because it extended the tax relief to plug-in hybrid vehicles.

Their argument was that plug-in hybrids, which can run on electricity alone for short periods before switching to petrol power, should be excluded from the tax break because they still used fossil fuels.

The MG ZS EV will be cheaper than its petrol equivalent once the legislation is passed. Picture: Thomas Wielecki

A compromise was reached whereby plug-in hybrids (PHEVs) would only be eligible for the tax break until April 2025.

Mr Martin said the sunset clause for PHEVs would need clarification, because it was unclear whether a person who bought a PHEV in April 2024 would be eligible for the tax break for ta year, or the full term of their lease, which was typically three to four years.

Electric Vehicle Council chief executive Behyad Jafari said the bill was a huge step forward in the development of the electric vehicle market in Australia.

“Passage of this bill is a really great moment for Australia. It shows how far we’ve come, from how we used to treat this issue to it now being a national priority,” he said.

A Tesla Model 3 will be roughly $21,000 cheaper over the term of a lease. Picture: Supplied

He said the legislation would mean more Australians would be able to afford to get behind the wheel of an electric vehicle.

“In quite a number of cases driving an electric car with this incentive will be cheaper over its life than buying a petrol or diesel alternative,” he said.

He said the next step needed to be the introduction of a fuel efficiency standard to encourage car makers to increase their supply of electric vehicles into Australia.

“Car makers are telling us they are sending EVs to every other market in the world because they are required to do so. Australia doesn’t so we’re at the bottom of the list,” he said.