Budget 2022: Australia’s first federal tax cuts for electric vehicles revealed

Labor’s 2022 budget finally delivered Australia’s first federal electric vehicles incentive. It will see a cut to the price of some electric cars in order to make them more affordable and encourage uptake.

The EV industry has generally been quite a sad state of affairs in Australia. And there are a few things that contribute to this. 

Firstly, they’re not particularly cheap. In fact, the cheapest new EV available in Australia is the MG ZS EV Excite and it starts at $44,990. Comparatively, you can get brand new petrol-powered cars for under $20,000.

Taxes don’t help either. The more expensive EVs in the market get hit with Luxury Car Tax (LCT) and back in 2021, the Victorian government passed a tariff that taxes EV drivers 2.5 cents per kilometre travelled and 2 cents for PHEV vehicles.

At the time, Victorian treasurer Tim Pallas referred to this as “modest” compared to the fuel excuse that combustion engines drivers pay.

“Everybody who uses a road should pay their fair share to maintain them,” he said in a statement in March 2021.

At the time, only 0.2% of Australians owned an EV and only 6,900 were sold in the previous year. This doubled to over 21,000 in 2021, but that’s still a far cry from the amount of petrol and diesel vehicles on the road.

New South Wales is set to introduce the same tax in 2027.

But besides these disincentives to buy, there have also been a distinct lack of incentives for EV uptake in Australia. Where some countries have had tax cuts, rebates and other perks for EV purchasers for years, even decades, Australia has been largely quiet. 

It’s only been over the last few years that there has been state based incentive programs introduced, as well as pushes to extend our public EV charging network.

For example, NSW offers stamp duty exemption on all EVs priced under $78,000. Both NSW and Victoria also offered a $3,000 rebate on a fixed amount of EVs towards the end of 2021. Now the federal government is stepping in to exempt some battery, hydrogen fuel cell and plug-in hybrid electric cars from fringe benefits tax and import tariffs. 

However, they need to be below the Luxury Car Tax threshold for fuel efficient cars, which currently sits at $84,916. This will only apply to cars purchased after July 1, 2022.

Employers will also be required to include exempt electric car fringe benefits in an employee’s reportable fringe benefits amount.

According to the October 2022 budget papers, the government believes this will decrease EV receipts by $410 million and payments by $65 million over four years.

This new measure will be renewed in 2025.

But that’s not all for Electric Vehicles

Labor will also be laying down $275.4 million over six years for the Driving the Nation Fund, which aims to provide cheaper and cleaner transport across Australia.

This includes $146.1 million over five years for the Australian Renewable Energy Agency. This will goes towards projects that reduce emissions in the transport sector.

A further $89.5 million over six years will go towards the Hydrogen Highways initiative. This will help create hydrogen refuelling stations on Australia’s busiest freight routes. This will be in conjunction with the states and territory governments and will include $5.5 million for the George Town green hydrogen heavy transport project.

Lastly, $39.8 million will be committed over five years for the much-talked-about National Electric Vehicle Charging Network. In partnership with the NRMA, it will aim to build 117 fast charging stations on major highways across Australia.