Aussie EV costs set to rise
FBT exemptions on the chopping block as road user charge nearsThe taxation and running cost advantages of electric vehicles that help compensate for their higher purchase prices look set to be eroded.
A national road user charge (RUC) appears primed to be mandated and applied to EVs and plug-in hybrids (PHEVs), while the push is also on to scrap the EV Fringe Benefits Tax (FBT) exemption.
Federal treasurer Jim Chalmers is a supporter of the proposed national road user charge since it would help compensate for declining fuel excise revenues as car buyers shift away from internal combustion (ICE) vehicles and into EVs and PHEVs.
As it stands, ICE vehicle owners pay 51.6c per litre of fuel in excise, while EV drivers obviously pay nothing, leaving PHEVs in the middle with a reduced amount (at least in theory) because their e-motors and batteries allow fuel-free running and thereby help reduce consumption when their engines are being used.
Meanwhile, the Productivity Commission (PC) has recommended the axing of the Electric Car Discount that exempts EVs – priced under the Luxury Car Tax threshold – purchased via a novated lease from paying the FBT, saving the owner thousands of dollars annually.
The PC, an influential independent body that’s often a guide to government policy thinking, says the introduction of the NVES CO2 reduction scheme negates the FBT exemption.
Its key criticism of the exemption, introduced by the Albanese government in 2022, is that it’s the government’s most expensive climate policy.
In 2023, the PC estimated the exemption cost between $987 and $20,084 per tonne of carbon abatement, and the cost of the exemption has blown out because of the unexpected popularity of the scheme. It is already scheduled for review in 2026.
The PC has also called for other state-based electric passenger vehicle discounts to be axed, recommended a new emissions-reduction incentive for heavy vehicles and backed the road user charge.
Think-tank Infrastructure Partnerships Australia conducted a road user charging forum involving government, business, Australian Automobile Association and others in Sydney this week.
An RUC is also on the agenda at a federal government economic reform summit next week.
A key impediment to be overcome before an RUC can be introduced are constitutional and legal challenges.
Victoria went it alone and introduced a road user charge of up to 2.6c per kilometre for zero- and low-emission vehicles in 2021, but that was overruled in the High Court in 2023.
The court accepted the argument the Victorian RUC was an excise, something only the Federal Government is empowered by the constitution to collect.
NSW, Western Australia and South Australia have all indicated an intention to introduce a road user charge, the former’s scheduled to come into effect as of July 1, 2027, or when EVs reach 30 per cent of new car sales and forecast to cost $300-$400 per EV annually depending on mileage.
The fuel excise is estimated to cost $1200 for a typical household with a car running on petrol.
While there is a common misconception the excise is directly allocated to road building and repair, it’s actually consigned to the federal budget before being spent on any number of budgetary items.
Responses from EV groups like the Electric Vehicle Council (EVC) have acknowledged the inevitability of an RUC, but with provisos.
There’s also a push for all vehicles to pay an RUC rather than just EVs and PHEVs, a set-up currently being introduced in New Zealand.
“Any reform to fuel excise should drive Australians toward EVs, because they cost less to run, cut emissions, and reduce our reliance on foreign oil,” EVC CEO Julie Delvecchio said.
However, the EVC is 100 per cent opposed to the removal of the FBT exemption for EVs.
“The Commission’s report gets one thing right and one thing very wrong,” Delvecchio said.
“It rightly recommends targeted support for zero-emissions trucks, but then inexplicably turns around and proposes scrapping the very incentives that are finally helping everyday Australians afford an electric car.”
Related: How does fringe benefits tax affect motor vehicles?
Related: How the tax man can help pay for your EV
Related: Your questions answered: Will I still get the FBT exemption if my BYD Shark 6 arrives after April 1?
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