Electric vehicles would cost more under a Coalition government, after Peter Dutton confirmed he would scrap a popular tax break for EV drivers in an apparent backflip that has caused confusion and anger among clean car advocates.
The initiative, which was introduced by the Albanese government in 2022, has meant if a person buys an EV priced under $91,387 through a novated lease program via their employer (when a lease is paid off through pre-taxed salary deductions) they do not have to pay fringe benefits tax (FBT) – even if the car is only for personal use.
A person leasing a $60,000 car eligible for the exemption would save almost $12,000 per year.
Leasing a Tesla Model Y worth about $71,000could cost less each year than leasing a $56,000 Toyota RAV4 Cruiser Hybrid– which doesn’t qualify for the exemption because it is not a plug-in hybrid – because the increased payments are offset by higher tax savings.
The tax break, which only applies to purely electric or plug-in hybrid vehicles, has been wildly popular since its introduction. Initial Treasury forecasts estimated the exemption would cost $55m in the 2024-25 financial year, butupdated figures have suggested it is costing as much as $560m per year.
Between 90,000 and 100,000 people have taken up the tax break so far, the National Automotive Leasing and Salary Packaging Association estimated.
On Monday, a reporter asked Dutton: “Labor’s fringe benefits tax exemption for electric vehicles has blown out by hundreds of millions of dollars compared with what was first forecast. Would aCoalitiongovernment repeal the EV tax break?”
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The Liberal leader replied: “No, we’ve said that what we’re opposed to is the government’s big tax on hybrids.” This was possibly a reference to the fact that hybrids only qualify for the tax break if they have a plug-in charging function.
Dutton went on to claim the cost of a Ford Ranger ute – Australia’s most popular car in 2024 – would increase by $14,000 under Labor, an apparent reference to its national vehicle efficiency standard (NVES).
The NVES was designed to bring more fuel-efficient cars to the Australian market by penalising manufacturers that send high-polluting vehicles here if they exceed an emission cap. Dutton has vowed to remove the penalties.
In the hours after Monday’s press conference, clean car advocates welcomed Dutton’s apparent commitment to retain the tax break for EVs.
The Electric Vehicle Council issued a statement from its chief executive, Julie Delvecchio: “Both major parties have confirmed the discount through support for the fringe benefits tax exemption for electric vehicles, with the Liberal leader,Peter Dutton, committing to retain it should the Coalition be elected at the 3 May election.
“This will mean Australians can continue to access cost-of-living relief by shifting to cleaner, more affordable cars. It is clear both major parties recognise the importance of this policy in cutting the cost of living for all Australians.”
However, on Wednesday afternoon, Dutton issued a joint statement with the shadow treasurer, Angus Taylor, and shadow finance minister, Jane Hume, outlining how the Coalition would “repair Labor’s budget mess”.
The announcement included a commitment to “unwind Labor’s taxpayer-funded and badly designed electric car subsidies, saving upwards of $3bn over the forward estimates and $23bn over the medium term”.
Within a few hours, Delvecchio issued another statement: “If the Coalition is indeed scrapping the FBT exemption, after the opposition leader just days ago indicated he didn’t have any proposals to change it, then we are extremely disappointed and confused by this backflip.
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“If the Coalition wants to make cars cheaper and driving cheaper during a cost-of-living crisis, it wouldn’t be removing this discount for Australians.”
EV manufacturer Polestar’s Australia managing director, Scott Maynard, said: “The Coalition’s decision to remove fringe benefits tax exemptions for electric vehicles demonstrates a complete lack of understanding of the significant cost-of-living, climate and health benefits of EVs.”
The Australia Institute also criticised the apparent backflip, noting the hundreds of millions of dollars in federal subsidies available for utes through tax perks, including for personal use, such as theluxury car tax exemption for American-style Ram and Chevrolet pickup trucksthat costs taxpayers $250m per year.
On Thursday morning, the opposition campaign spokesman, senator James Paterson, said the Coalition’s position had been “misunderstood”, saying Dutton’s initial comments on Monday were “clearly referring to Labor’s plan to tax new vehicles” – the NVES.
“From the very beginning, we’ve been highly critical of this policy,” Paterson said. “We don’t think it’s a good use of taxpayers’ money to subsidise people who can afford to buy a brand new electric vehicle and have everyone else pay for that.
“We’ve always had the view that this EV tax exemption is not justified.”
Dutton was later peppered with questions about his position.
“There has been no policy change, no discussion about that policy this week. It has been longstanding since we took the decision. I answered the question in relation to the tax,” he told reporters.
Asked about his apparent support of the exemption on Monday, Dutton said: “I think we’re better off just to accept we have a difference of opinion, but there’s been no change in policy.”
He would not say why the Coalition had not corrected the initial responses of clean car advocates praising him for committing to retain the exemption.
Guardian Australia contacted the Coalition’s campaign headquarters for clarification on its position.