Coalition split over tax on electric cars

A group of Liberal MPs is pushing for the electric cars to gain an exemption from the luxury car tax in the May budget.

Coalition MPs are split over electric vehicles policy, with a group of Liberal MPs pushing for the low-emission technology to gain an exemption from the luxury car tax in the May budget.

The Australian has been told backbench MPs have urged Josh Frydenberg and Finance Minister Simon Birmingham to give tax breaks to electric cars to encourage their penetration into the local market.

Liberal MPs Jason Falinski, Katie Allen, Trent Zimmerman and Andrew Bragg have thrown their support behind the vehicles being exempt from the luxury car tax, which kicks in for fuel efficient cars worth more than $77,565.

MPs privately argue the policy would send a message to the community the government was in favour of the low-emission technology without being a major burden on the budget.

“There is a very good argument for carving out electric vehicles and hybrids from the luxury car tax as we are in the early adoption phase of this new technology,” Mr Falinski said.

As divisions open up within the government over Scott Morrison’s push to accelerate climate change action, Queensland senators Gerard Rennick and Matt Canavan warned electric vehicles should not receive special treatment.

Senator Rennick, who does not believe climate change is caused by human activity, said he would cross the floor against legislation to exempt electric vehicles from the 33 per cent luxury car tax.

“I don’t want another subsidy for the rent-seeking renewables industry,” Senator Rennick said.

“I won’t support the bill.

“This whole idea that you are going to get down to net-zero carbon emissions by 2050 is nonsensical.”

Senator Canavan said the luxury car tax should be scrapped for all vehicles, rather than just electric ones.

“If there is a carve out for electric cars we must also have a carve out for farmers who have to pay luxury car taxes on work vehicles,” Senator Canavan said.

“You can’t have a tax deduction for rich, woke inner-city dwellers funded by those who work hard to grow our food.”

Labor has committed to exempting electric cars from import and fringe-benefit taxes, but Anthony Albanese’s policy would still subject the vehicles to the luxury car impost.

In its pre-budget submission, the Australian Automobile Association urged the federal government to scrap the luxury car tax and import tariff on electric vehicles to reduce their upfront costs.

The peak motoring club body also urged the government to create a “nationally consistent” road user charging system for electric cars.

“In the absence of decisive federal leadership, some state governments have announced their intention to bring EVs and other ultra-low fuel consumption vehicles into their respective tax systems from 2021,” the submission says.

“This undermines the federal government’s role in funding transport-related activities.”

Mr Zimmerman, the member for North Sydney, said it was “vital” there was more government support for the uptake of electric cars.

“The obvious way to support more electric vehicles entering Australia is to reduce the price. And one of the biggest price barriers is the luxury car tax,” Mr Zimmerman said.