Federal Budget 2023: Plug pulled on hybrid car tax breaks
An attractive fringe benefits tax exemption for green machines has helped drive sales of electric and plug-in hybrid cars – but that’s about to change. See how.
Federal Budget
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Hybrid cars that fail to match green claims have been cut out of lucrative tax concessions in the 2023 budget.
An attractive fringe benefits tax exemption for green machines has helped drive sales of electric and plug-in hybrid cars since July 2022.
The incentive dramatically reduced the cost of leasing green machines, putting them roughly on a par with conventionally powered cars.
But plug-in hybrid cars will no longer be eligible for the tax break from 2025.
The budget papers confirm that “the government will sunset the eligibility of plug-in hybrid electric cars from the fringe benefits tax exemption for eligible electric cars”.
While fully electric cars use battery power alone, plug-in hybrid cars combine a regular petrol engine with an electric motor and have smaller battery.
Cars such as the Mitsubishi Outlander and MG HS plug-in hybrids allow drivers to temporarily run on battery power for a few dozen kilometres before their petrol motors kick in.
Simpler “self-charging” hybrids such as the Toyota RAV4 cannot drive on battery power alone for more than a few hundred metres.
Plug-in hybrid cars shot to popularity in Europe through a loophole in standardised fuel economy tests requiring manufacturers to run cars through the same simulated test loop for a few dozen kilometres.
The ability to run on battery power for a significant portion of the test results in fuel economy claims that are difficult to match in the real world.
Some plug-in hybrid cars claim to use less than two litres of fuel per 100km of driving, while returning far higher real-world fuel consumption.
The disparity between claimed and real-world fuel use worsens if owners have long commutes or neglect to plug in their car every day.
Overseas reports show less conscientious plug-in hybrid drivers have taken advantage of tax breaks without reducing vehicle emissions, as their cars can be driven for thousands of kilometres without ever being plugged into electric power, negating any environmental benefits.
Originally published as Federal Budget 2023: Plug pulled on hybrid car tax breaks
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