EV cuts loom while Aussies pay for ute tax
Billions in tax savings are suddenly under threat, via an Albanese government U-turn but there’s an elephant in the room no one is addressing and Aussies are paying massively for it.
OPINION: We’ve all seen the headlines: electric vehicle (EV) tax breaks are costing taxpayers billions.
According to Government modelling, the Fringe Benefits Tax (FBT) exemption for EVs, alongside other related perks, is forecast to cost Australians $23.4 billion by 2036.
That’s a staggering figure, especially when you consider this policy only began in July 2022.
As the Productivity Commission highlighted in its second report, the cost of the EV FBT exemption has blown out from an initial forecast of $55 million per year to a staggering $560 million, leading to calls to scrap it.
But have you ever wondered about the figures for subsidising big, diesel and fuel-chugging utes over the past decade?
Well, that number doesn’t exist.
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While policymakers and commentators are lining up to slam EV incentives as “inefficient” or “costly”, Australia’s longstanding love affair with utes is being ignored.
HUGE COST OF UTES IGNORED
These vehicles, which make up four of the top five best-selling models in the country, are quietly driving away with generous tax perks – and Aussies are paying for it.
Under Australia’s tax system, commercial vehicles, such as dual-cab utes, can claim a Fringe Benefit Tax exemption, provided they’re used “primarily” for work.
But the rules are so vague, that many use utes for personal reasons, which is allowed as long as it’s “minor, infrequent, and irregular”.
In reality, many of these utes aren’t ferrying tradies and tools. They’re doing school drop-off, towing jet skis, and sitting in suburban streets.
According to the Australian Institute, there are 1.5 times more utes on the road than there are actual tradies, which suggests a lot of people are claiming a tax break for a “tool of trade” that’s really just a big, comfy family car.
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It’s not just FBT, utes also avoid the Luxury Car Tax, even if they cost well over six figures, because technically, they’re not “passenger vehicles”.
So you can buy a RAM 1500 and avoid paying LCT, while someone buying a more efficient EV might get slugged.
In 2023, high-end American-style utes alone cost Australians over $250 million in foregone revenue from the Luxury Car Tax, according to a report by the Australia Institute.
That figure doesn’t even count the tax revenue lost from the FBT exemption.
Australia Institute research director Rod Campbell said Australia is subsidising “big, dumb utes by hundreds of millions of dollars each year”.
“These vehicles are damaging roads, reducing safety and increasing emissions, yet they are given a massive tax break,” he said.
I’m not ignoring the $23 billion figure attached to EV tax breaks, including FBT exemptions, import tariff relief, and other incentives but these tax breaks are designed to make EV ownership more accessible and affordable, particularly through novated leasing.
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According to the National Automotive Leasing and Salary Packaging Association, more than 100,000 Australians have taken up an EV novated lease since mid-2022.
These policies are critical to making EVs accessible, especially as the upfront costs are a little higher than petrol and diesel equivalents.
These EV tax breaks are part of a broader push by the Federal Government to reach net zero by 2050, with transport making up 20 per cent of national emissions.
HALF-PREGNANT APPROACH
But the Productivity Commission’s report now recommends scrapping the EV FBT exemption, arguing it’s too costly and now “duplicative” with the New Vehicle Efficiency Standards (NVES).
Sure … the (NVES) will encourage automakers to import cleaner cars into the market, but that’s only half the battle.
If consumers aren’t incentivised to buy them, nothing changes.
You need both; one brings supply, the other brings demand.
As the Federal Chamber of Automotive Industries (FCAI) noted, without continued consumer support, the “continuation of current customer buying preferences will inevitably lead to the accrual of substantial penalties.”
Automakers can’t just absorb these costs; they will likely have to raise prices on popular models, reduce their availability, or exit the market altogether.
Countries that have successfully transitioned to high EV adoption rates such as Norway, have almost always used both strong efficiency standards and generous consumer incentives.
Relying solely on one or the other often leads to slower progress.
So if we’re serious about being fair and decarbonising the transport sector, then shouldn’t we be looking at everything?
So why are we ignoring the ute loophole? Is it because it’s politically uncomfortable?
Talking about utes means comforting one of Australia’s most beloved vehicle segments.
Tradies vote and Aussies rely on them.
If the Federal Government decides to pull EV tax breaks now, while leaving the ute loophole wide open, that’s like turning off a light in a room and calling it a major win for energy efficiency.
We need better policy and smarter decisions.
Originally published as EV cuts loom while Aussies pay for ute tax
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