EV backers urge Jim Chalmers to ‘get calibration right’ as fringe-benefits tax overhaul risks slowing uptake

Electric car advocates have cautioned Jim Chalmers to “get the calibration right” on any future changes to incentives for drivers to ensure it doesn’t dismantle Australia’s EV transition.

The heads of Australia’s peak body for EVs and novated vehicle leasing have argued government tax breaks were helping modernise the nation’s vehicle fleet and warned axing benefits too soon could hamper uptake.

It comes as submissions to the Treasurer’s roundtable in Canberra this week called for a fringe benefits tax exemption for EVs to be abolished and the establishment of a national road user tax.

The proposed road user tax would counter declining numbers of petrol and diesel vehicles, which will erode Australia’s fuel excise revenue.

EV drivers don’t currently contribute to the fuel excise — which is vital to pay for road construction and maintenance — while combustion engine vehicles cough up 51.6 cents a litre for it at the bowser.

As for scrapping the tax exemption — chair of Australia’s Productivity Commission (PC) argued there were better ways Australia could get its bang-for-buck as it tries to lower emissions.

Danielle Wood has instead suggested a national carbon price to incentivise the transition to clean energy.

Ms Wood told a National Press Club address on the eve of Dr Chalmers’ forum that the independent advisory body found the tax break as “duplicative and high-cost”.

Under the 2022-introduced exemption, employees can save tens of thousands from their pre-tax salary through a novated lease for an EV under Australia’s $91,387 “Luxury Car Tax” threshold.

National Automotive Leasing and Salary Packaging Association boss Rohan Martin hit out at Ms Wood’s “cost-per-tonne abated” argument, saying the mindset that Australia could get bigger reductions in pollution if that money was spent elsewhere “misses the forest for the trees”.

“The problem with the PC’s analysis is that it ignores system benefits that compound over time: unlocking supply of new models, building a pool of near-new vehicles that flow into the used market, normalising charging habits, and giving manufacturers confidence that Australia is worth prioritising,” he said.

Electric Vehicle Council chief executive Julie Devecchio echoed Mr Martin’s concerns, saying that more EVs on Australian roads was good for the nation.

“Removing incentives now, or introducing a road user charge too early, could lock Australians out of savings for longer and stall the shift to cleaner cars,” she said.

“Around the world, incentives have been the key to driving EVs into the mainstream.

“Ending the Electric Car Discount would stall adoption, leaving Australians with more pollution, poorer health, and deeper reliance on foreign fossil fuels.”

Ms Devecchio said that road user charges must only begin once electric vehicles reach 30 per cent of new sales and should be applied to all vehicles, not just EVs.

Mr Martin added that despite EV enthusiasm in Australia, they still only accounted for less than 10 per cent of new sales.

“We are launching from a low base. No country has reached mass EV adoption without sustained demand-side incentives,” Mr Martin said.

“The fringe benefit tax exemption on electric vehicles is currently doing exactly what Parliament designed it to do. It’s lifting EV uptake among ordinary working Australians, seeding a second-hand market, and accelerating the transition in the very segments where emissions are hardest to cut.

“Abolishing it now would be a body-blow to household budgets and to Australia’s decarbonisation task.”

Mr Martin also argued EV subsidies were a cost-of-living measure that outer suburban drivers have tapped into through novated leases — often teachers, healthcare workers and tradies — not “upper middle-class woke welfare”.

“It’s practical cost-of-living relief delivered through the tax system,” he said.

Mr Martin pointed instead to data to June 30, which revealed some of the top postcodes signing onto novated leases for EVs were in the outer suburbs of Australian cities.

The top areas across the nation included Aberfoyle Park, 21km south of Adelaide’s city centre; Ipswich, 40km west of Brisbane; Kellyville 36km northwest of Sydney’s CBD; and Werribee, 32km southwest of Melbourne’s city centre.

In Perth, among the top postcodes for uptake was around the southern Perth area of Hammond Park to Cockburn central area, followed by Armadale to Mount Nasura.

“In fact, the strongest growth in EV sales since the FBT exemption has been in outer-suburban areas across many industries,” he said.

Mr Martin said the exemption was a strong driver for people in growth corridors to consider the lower emissions option, alongside the lower running costs EVs offered.

Among attendees at this week’s roundtable is NSW Treasurer Daniel Mookhey, who is representing state government counterparts as the Board of Treasurers chair.

Mr Mookhey has already banked on a road user charge being established in NSW, including it in State Budget estimates to be applied to eligible EVs from July 1, 2027 or when EVs make up 30 per cent of all new vehicle sales.

“I think it is important that the nation acknowledges that this is a question we have to tackle,” he said on Tuesday.

“And secondly, as we are seeing more electric vehicles introduced into the light vehicle fleet and into the heavy vehicle fleet, I do think it’s a good time for us to be figuring out what is the future of the road user charging system.”

Victoria had tried to implement a State-based road-user charge in 2021 but the proposal was struck down in 2023 by the High Court of Australia.

Environment Minister Murray Watt last week said the case had shown that it would have to be introduced at a Federal level.

While Dr Chalmers had previously been less definitive in his language around a potential fee, on Sunday he said the government was “working” with the States on a charge but admitted they hadn’t “settled on a model or on the timing of implementation”.

“I know that there’s appetite amongst the state and territory treasurers to progress this agenda,” he said.

“We haven’t settled on a model or on the timing of implementation but in the last parliamentary term and including as recently as Friday, this is something I’ve been discussing with the state and territory Treasurers.

“This is work that we’re doing together, working up options but we don’t have a concluded view on the best model (and) we don’t have a settled view on the best timing.”