New bill to make EVs cheaper, with PHEVs given discount sunset clause

Australian now offers nationwide assistance for the purchase of plug-in electric vehicles, following the passing of the Electric Car Discount Bill by federal parliament last week.

The bill exempts EVs from fringe benefits tax (FBT), resulting in a significant price reduction for some employers and employees who salary sacrifice. 

A late amendment to the bill means plug-in hybrid discounts end on April 1 2025. Non plug-in hybrids (which includes all models sold by Toyota) have always been excluded from the bill.

The PHEV sunset clause was a late addition required to secure crossbench support on the Senate to pass the bill.

The federal government has also agreed to prioritise the purchase of pure EVs over PHEVs or orthodox ICE vehicles for its own fleet wherever possible.

The bill, which was a federal government election promise, is expected to have a substantial but not fundamental impact on EV sales.

That’s because fleets account for 36 percent of new vehicle sales, with 47 percent of them likely to be considered for FBT.

FBT is levied on vehicles purchased by an employer and used by an employee for private as well as company use.

The Australian Tax Office regards private use as a payment in another form and, therefore, taxable.

This is payable by the employer unless the employee has secured the vehicle a through salary packages or novated leasing and has agreed to cover the FBT liability.

The federal government estimates the scheme will save an employer up to $9000 per year on a $50,000 model. A salary sacrificing individual could save up to $4700 annually.

About 12.3 percent of new vehicles were purchased via salary sacrifice in 2020-2021.

As part of the finalised bill the Australian Tax Office will also issue guidance on when household charging technology is able to be included within FBT-exempt vehicle packages.