“Removing this exemption will hurt Australian workers”: Talking to the experts about Dutton’s cuts to EV incentives

A Liberal Party statement released on Wednesday announced that if elected, a Coalition government will repeal a Labor government $3 billion tax break aimed at incentivising new vehicle buyers to go electric.

On Thursday, Dutton insisted he hadn’t changed his mind on the policy, despite only days earlier giving a clear “no” when asked whether he had plans to repeal it.

Any change to the Labor policy will likely affect north shore residents significantly. Data sourced from the Road and Maritimes Services indicates that Ku-ring-gai, Willoughby, and Lane Cove have some of the highest percentages of electric vehicles. 

How does it work?

Fringe Benefit Tax is a tax paid by employers on certain benefits provided to their employees. 

This might include covering the cost of public transport, reimbursement of expenses, or most significantly here, leasing a company vehicle.

For vehicles, this is typically done through a practice known as salary sacrificing, which involves a worker reducing their taxable income in order to lease a car through the company with that money. 

When the exemption was legislated in 2022, it provided an incentive for those looking to acquire a new car this way to make the jump to electric vehicles, which at the time were more expensive across all models than petrol cars. 

This tax break, which slashed the prices on new electric vehicles by $3000 to $5000 on average, saw the amount of electric vehicles on Australian roads skyrocket. Last year, nearly one in ten new car sales were electric vehicles. Last month, they jumped to 14 percent.

What does it mean?

The purpose of the current Labor tax exemption is two-fold. On one hand, 21 percent of Australia’s carbon emissions come from the transport sector, with 60 per cent of this attributable to passenger cars and light commercial vehicles. Pushing Australians towards electric vehicles, which can be run on renewable energy, is one of the best ways to lower these emissions. 

On the other hand, electric vehicles and hyrbids are significantly more fuel efficient than petrol equivalents, effectively making the exemption a form of cost of living relief, too. If the $3-5k reduction in price can make the higher priced electric vehicles competitive with petrol and hybrid cars, Australians can save more overall on fuel costs.

Despite the typical association of electric vehicles owners as metropolitan residents primarily concerned with environmental issues, outer metropolitan areas such as Bradfield and Berowra have had some of the highest uptakes of electric vehicles in the state. 

Electric Vehicle Council CEO Julie Delvecchio has previously stated that this growth is due to the fact that “these communities often commute longer distances, meaning they benefit the most from ditching expensive overseas fuel.”

What do the experts say?

Aman Gaur, Head of Legal, Policy and Advocacy at the Electric Vehicle Council told the Lorikeet that “one of the best ways to save money and cut national emissions is by driving an electric car and the exemption from fringe benefits tax allows workers to do both those things at a much cheaper upfront price for an EV.”

He went on to state that “removing this exemption will hurt Australian workers and deny them a practical and sustainable way to save up to $3,000 per year on fuel and maintenance costs when driving an EV.”

What does the community say?

Jacqueline Moldovan, a north shore local of just under 20 years, expressed her disappointment in the policy reversal to the Lorikeet. “I don't believe the Liberal party that we have at the moment in the majority holds liberal values … most of our community fully expected something like this … it's nonsense.”

“These clawbacks of climate action are destructive not only to our domestic economy and well-being but to global economies and well being … Australia is not on this planet on its own.”

Jacqueline's family owns two MG Electric vehicles.

When talking to another local earlier this month, the Lorikeet also found the availability of electric vehicles for new car buyers to be a key issue among voters in north shore electorates. 

“My parents have an EV and I have a hybrid. I'd love to get an EV.” said Eleanor Betts, a cello teacher in Bennelong. “I’d feel a lot less climate guilt that way.”