Electric vehicle (EV) prices could increase if the Coalition wins the upcoming election, following Peter Dutton’s confirmation that he would remove a popular tax break for EV drivers. The announcement has sparked confusion and backlash from clean car advocates.
Introduced by the Albanese government in 2022, the initiative allowed people who buy an EV priced under $91,387 through a novated lease program to avoid paying fringe benefits tax (FBT). This tax break applied even if the car was used for personal purposes, as long as the vehicle was leased through an employer, with payments made from pre-tax salary deductions.
For example, leasing a Tesla Model Y worth about $71,000 could cost less annually than leasing a $56,000 Toyota RAV4 Cruiser Hybrid due to the tax savings offsetting the higher payments. A Guardian Australia analysis revealed that the exemption could save a Tesla owner around $10,000 over four years, depending on their salary.
The tax break, which was initially limited to electric cars and had applied to plug-in hybrids until earlier this month, has been popular since its introduction. Treasury forecasts predicted the exemption would cost $55 million in 2024-25, but updated figures suggest it could be costing as much as $560 million annually.
According to the National Automotive Leasing and Salary Packaging Association, between 90,000 and 100,000 people have used the tax break so far.
At a press conference on Monday, a reporter asked Dutton whether the Coalition would repeal the EV tax break, noting its significant cost overruns. Dutton replied that the Coalition opposed the government’s new tax on hybrids, possibly referring to the fact that hybrids no longer qualify for the tax break.
Dutton also criticized Labor’s vehicle efficiency standards (NVES), which impose penalties on car manufacturers for sending high-emission vehicles to Australia. He pledged to remove these penalties if the Coalition forms the next government.
After Dutton’s comments, clean car advocates were initially relieved, with the Electric Vehicle Council expressing support for his apparent commitment to retain the tax break. CEO Julie Delvecchio issued a statement welcoming Dutton’s stance, saying, “Both major parties have confirmed the discount, and if the Coalition is elected, Australians can continue to access cost-of-living relief by choosing cleaner, more affordable cars.”
However, just days later, Dutton and the Coalition’s shadow ministers announced plans to scrap the FBT exemption as part of a broader strategy to “repair Labor’s budget mess.” The move is projected to save over $3 billion in the short term and up to $23 billion in the medium term.
Delvecchio quickly expressed disappointment, calling the reversal a “backflip” and criticizing the decision as a setback during a cost-of-living crisis. EV manufacturer Polestar’s Australia managing director, Scott Maynard, also condemned the decision, stating it showed a lack of understanding of the climate, health, and cost-of-living benefits of EVs.
The Australia Institute echoed these concerns, pointing out that taxpayers are already subsidizing utes, including luxury cars like the Ram and Chevrolet pickup trucks, through tax perks that cost the government $250 million annually.
On Thursday, the Coalition’s campaign spokesman, Senator James Paterson, sought to clarify the confusion. He stated that Dutton’s initial comments on Monday referred to Labor’s new vehicle tax plan, not the EV tax break. Paterson reiterated the Coalition’s long-standing opposition to subsidizing EVs for people who can afford them.
Despite Dutton’s earlier comments indicating support for the EV tax exemption, he later maintained that there had been no policy change, and the Coalition’s stance had remained consistent. He declined to address why the Coalition had not corrected clean car advocates’ initial praise of his position.
Guardian Australia reached out to the Coalition’s campaign headquarters for further clarification on its position.
