Committee gives green light to rebate on electric vehicles from work

A Senate Committee recommended passing legislation that will reduce the cost of electric vehicles, with the Greens signaling that they will try to get hybrid vehicles removed from the incentive scheme.

On Tuesday, the Labor-led Senate Economic Legislation Committee recommended passage of the bill that would introduce the new government’s election promise of a rebate on electric cars.

Bill amends tax law to provide tax exemption from fringe benefits for zero- and low-emission cars purchased after July 1, reducing upfront cost of qualifying battery electric cars, fuel cell electric cars hydrogen and plug-in hybrid electric cars.

Labor says the change will save individuals up to $4,700 a year by sacrificing their wages to buy one of the vehicles, while employers could save nearly double that.

It will cost the budget around $205 million compared to the forward estimates.

The new government also intends to scrap the 5% import duty on cars to encourage more supply from manufacturers.

The bill is still being debated in parliament and was returned to the Federation House on Wednesday, but now enjoys overwhelming support from stakeholders, according to the new report.

The Senate Committee report, based on 26 submissions and two public hearings, notes that all of the evidence provided was supportive of the bill, with many backing it as a way to increase the limited local supply of cars.

Several stakeholders told the committee that the benefits were restricted to a narrow category of beneficiary employees and would provide the most relief to those with higher incomes. There have also been calls to increase the threshold to include more higher priced cars due to the limited amount below the proposed threshold.

The inclusion of plug-in hybrid vehicles – which still rely on an internal combustion engine and fossil fuels – has also sparked debate, with many people submitting that non-zero-emission cars should be excluded from the scheme.

The committee concluded that the bill was an “early but important step” in the transition to greater use of electric vehicles in Australia, recommending that it pass without amendment.

Coalition senators disagreed, saying further consideration of the proposal was needed and that any programs should be considered after the next national electric vehicle strategy.

Coalition senators, committee deputy chairman Andrew Brag and Dean Smith, called for the $205 million cost instead to be used elsewhere to encourage adoption, including charging infrastructure.

The Greens, whose support will be needed in the Senate to pass the bill, said it should pass with amendments. The party has warned that including plug-in hybrids would lock more fossil fuel subsidies into the tax system despite Australia facing a climate crisis.

Plug-in hybrid vehicles should be removed from the Labor Party’s agenda and complementary plan to also reduce import duties on them, the Greens have recommended, with savings being redirected to support the uptake of electric vehicles.

Calls to remove plug-in hybrids from low- and zero-emission vehicle adoption programs come as other jurisdictions set deadlines to phase out internal combustion engine vehicles.

In June, the 27 countries of the European Union agreed to completely eliminate the sale of combustion engine cars in the Union by 2035. As the ban includes all cars and vans that produce CO2 emissions, the sale of hybrids would effectively be banned in the bloc.

The Australian Capital Territory last month became the first Australian jurisdiction to set an end date of 2035 for the sale of new internal combustion engine cars. It will also stop viewing hybrids as a zero-emission vehicle for government fleets.

The Greens also recommended that personal electric vehicle charging infrastructure receive the same tax benefits when purchased with an electric vehicle.

Do you know more? Contact James Riley by email.

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