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<\/p>\nVarious echo chambers have been chuntering for some time about a generous federal tax discount for electric vehicle buyers.<\/p>\n
It is, we’ve been told, an outrageous example of “middle class welfare”.<\/p>\n
Yet it’s a policy the government this week confirmed will be largely kept on the books in Tuesday’s budget.<\/p>\n
It’s a tax break that applies to novated leases, which allow car buyers to pay the interest, registration, insurance, maintenance and operating costs of a vehicle from pre-tax income.<\/p>\n
The effect of which is to lower a worker’s taxable income and thereby reduce how much income tax they pay.<\/p>\n
On a traditional novated car lease, the benefit is subject to fringe benefits tax (FBT), which erodes much of the advantage of paying for the vehicle from pre-tax income.<\/p>\n
When Labor won the 2022 election it soon delivered on a promise to exempt FBT as a way to incentivise EV uptake at a time when most consumers were still on the fence about their benefits.<\/p>\n
This week the government announced it would gradually phase-out the benefit.<\/p>\n
From April, it will be limited to EVs costing no more than $75,000, down from the current ceiling of $91,000. Two years later, FBT will be reapplied minus a 25 per cent discount.<\/p>\n
<\/p>\n
When Labor won the 2022 election it soon delivered on a promise to exempt the fringe benefits tax as a way to incentivise EV uptake. (ABC News: Callum Flinn)<\/p>\n
EV sales go up<\/p>\n
One of the stated policy goals at the time it was introduced was to accelerate the flow of EVs into the second-hand car market.<\/p>\n
That’s because novated leases tend to last for between two to five years. Once they end, many of the vehicles are onsold.<\/p>\n
The underlying logic was that while the FBT exemption would be taken up mostly by people on higher incomes, when they rolled those cars into the second-hand market it would be to the benefit of lower-income households.<\/p>\n
Which is what now appears to be happening, just as demand for EVs accelerates because of the war in the Persian Gulf.<\/p>\n
Second-hand EV sales leapt by 138 per cent between February and March to 7557, according to data from the Australian Automotive Dealer Association.<\/p>\n
The biggest selling second-hand vehicles in April were Tesla Model 3s and Model Ys, which were the most popular cars when the FBT exemption first set off a wave of new buyers in 2023 and 2024.<\/p>\n
The data supports the notion that those same cars are now hitting the second-hand market, as intended, where they’re selling for between $25,000 and $40,000. Other models are cheaper still, particularly when factoring in the lower operating costs of EVs.<\/p>\n