Motorists have thousands of dollars at stake in this election

Motorists will pay thousands of dollars more for an electric vehicle under the Coalition’s commitment to scrap Labor’s generous tax breaks as the major parties split over the need to financially support petrol power or EVs.

The Coalition has committed to end Labor’s policy exempting new battery EVs that cost less than $91,387 from fringe benefits tax, following an explosion in the cost of foregone tax revenue compared to the government’s expectations.

Labor and the Coalition are opposed on policies that offer thousands in savings for electric car buyers. Credit: Alex Ellinghausen, James Brickwood

Fringe benefit tax exemptions are available to people who buy an EV under a novated lease from their employer, which means repaying it through salary sacrifice. The tax break can save around $5000 a year on a four-year loan for a $60,000 car.

The scheme was originally budgeted at $55 million a year, but is currently costing more than $550 million annually.

Around 100,000 customers have taken advantage of the fringe benefits tax incentives since it came into force three years ago. Plug-in hybrid vehicles were included in the scheme up to April 1, but it is now only open to pure battery EVs.

Based on the original cost estimate, Labor anticipated roughly 10,000 customers would have purchased vehicles on the scheme by now, or 3000 a year.

The top 10 most popular car bands leased under the scheme are, in order, Tesla, BYD, Mitsubishi, MG, Volvo, BMW, Kia, Hyundai, Mazda and Polestar.

Coalition Leader Peter Dutton has backflipped on his position on the tax exemption this week.

He was asked on Monday if a Coalition government would repeal the EV tax break, and said: “We don’t have any proposals to change those settings.”

However, a statement by the Coalition on Wednesday committed to scrap “Labor’s taxpayer-funded and badly designed electric car subsidies”.

On Thursday, Dutton reiterated the intention to dump the scheme and claimed that had always been his position.

“There has been no policy change,” he said.

The Coalition has made two other commitments to appeal to petrol car drivers.

The fuel efficiency standard applies to new car sales and limits the average emissions of a carmaker’s overall fleet of vehicles sold each year, measured in grams of carbon dioxide per kilometre. Companies must pay a penalty of $100 for each gram per kilometre the caps are exceeded.

Energy Minister Chris Bowen has rejected Dutton’s claim that fuel efficiency standards drive up car prices, arguing that every developed economy has implemented vehicle efficiency standards, which had not caused car prices to rise in any jurisdiction.

It has also pledged to forego a new source of revenue if it formed government, with a commitment to scrap Labor’s fuel efficiency scheme, which it calls a “ute tax” that would slug petrol car drivers.

Known as the New Vehicle Efficiency Standard, it applies to new car sales and limits the average emissions of a carmaker’s overall fleet of vehicles sold each year, measured in grams of carbon dioxide per kilometre. Companies must pay a penalty of $100 for each gram per kilometre the caps are exceeded.

Dutton has said that the penalties would force car markers to raise the price of their models, including that of the Toyota RAV4, which he claimed would increase by $9700.

Dutton has also promised to cut the fuel excise from 50¢ a litre to 25¢ a litre for a year if the Coalition wins the coming election, which would save the average driver $6 a week on petrol and cost the budget $6 billion in revenue.

However, the Coalition has emphasised the tax cut would save more for motorists who drive the most, such as families in outer suburbs where both parents commute each day, offering up to $28 a week for a two-car family.

Labor has said its EV policies are designed to boost uptake of clean cars, cut emissions from the transport sector and reduce the cost for motorists who do the most driving.

Bowen has accused Dutton of creating “policies copied from America”, which is a reference to US President Donald Trump’s vow to eliminate tax breaks for EVs and former prime minister Scott Morrison’s claim in the 2019 election that EVs would “end the weekend”.

Labor argues that EVs are popular with outer-suburban motorists, who are seeking to cut their fuel bills.

Data from the National Automotive Leasing and Salary Packaging Association shows many of the most popular suburbs for novated clean car leases are located in outer suburbs. In Melbourne, the top five locations are Werribee, Hoppers Crossing, Brandon Park, Craigieburn and Cranbourne. In Sydney, they are Kellyville, Marsden Park, Baulkham Hills, Castle Hill and Lane Cove.

The average Australian drives around 12,000 kilometres per year and spends about $2500 on petrol. The Electric Vehicle Council calculates that an EV travelling 12,000 kilometres costs around $500 to charge each year.

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