A ‘reduction on electric cars’ will pass through parliament, reducing the cost of low-emission cars

Tax breaks for plug-in hybrids will end by 2025 and rebates that will lower the price of popular electric and low-emission cars are set to pass through parliament after MPs agree a deal with Labour.

The ‘electric car discount’ policy was a Labor election promise and the legislation aims to make an electric vehicle, such as the Nissan Leaf, up to $2,000 cheaper for Australians and $9,000 for employers who manage fleets.

It will do this by exempting qualifying low-emission vehicles from import taxes and employee benefits tax.

The Coalition opposes the policy, which is expected to cost the budget $4.5 billion over the decade to 2033, and the legislation has been stalled in the Senate due to a dispute with the crossbench over plug-in hybrids .

Plug-in hybrids have an electric charger and an internal combustion engine.

The Greens and Independent Senator David Pocock had argued their inclusion in the scheme was in fact a new fossil fuel subsidy, while Treasurer Jim Chalmers had insisted they be kept for locals to appease concerns over the range of low-emission cars.

Senator Pocock negotiated an end to tax breaks for plug-in hybrids, arguing it amounted to a fossil fuel subsidy.(ABC News: Matt Roberts)

Under a compromise reached this week, plug-in hybrids will be phased out of the program by April 2025.

The crossbench also expects the government to purchase internal combustion and plug-in hybrid cars for the large Commonwealth fleet only in exceptional circumstances.

“The government worked in good faith with the crossbench on the amendments,” Mr Chalmers said.

“These changes are a win for motorists, a win for businesses and a win for climate action.”

Reporters hold microphones up to Treasurer Jim Chalmers as he holds up a stack of budget documents.
Mr Chalmers said the government negotiated in good faith on its electric vehicle rebate bill.(ABC News: Nick Haggarty)

As part of the deal, the tax office will also issue new guidelines on when home charging infrastructure, which can cost thousands of dollars, can be claimed.

“The government fleet will switch to electric and when these cars are sold used, it will help bring down the cost of electric vehicles [down] for ordinary people,” said Greens leader Adam Bandt.

The bill is backdated to July 1 this year and car dealers, along with electric car groups, have urged parliament to reach a deal as soon as possible.

The industry had argued for the temporary inclusion of plug-in hybrids, in part due to the global shortage of electric vehicles and huge wait times for some models.

“Bold and decisive action is needed to address the high prices of electric vehicles,” said Senator Pocock.

“This provides fleet companies with certainty and enables the government to deliver on its promises of providing charging infrastructure over the next three years.”

Electric car groups now want fuel efficiency standards

Electric vehicle groups and environmental lobbyists have long argued that the much bigger test for electric vehicles and low-emission cars is the introduction of fuel efficiency standards.

Efficiency standards are imposed on the entire fleet of vehicles manufacturers sell in a country – and those who exceed the standard are penalized.

The stricter the standards, the more carmakers are encouraged to provide electric vehicles or low-emission options.

Energy Minister Chris Bowen is a fan of it and released a discussion paper in September.

The government says the standards will be key to increasing the availability of certain car models in Australia and ensuring manufacturers send more electric vehicles to Australia.

A white car with a power cord plugged into the front.
Popular electric vehicles like the Nissan Leaf are expected to be cut thousands of dollars for households and businesses after the bill passes.(ABC News)

Around 3% of cars sold today are electric, lagging behind many other developed countries.

Electric car lobby groups say this is unlikely to be an accurate reflection of demand, as waiting lists for some popular models are very long.

Beyhad Jafari of the Electric Vehicle Council said that although the biggest challenge is yet to come, today’s decision was a good first step.

“Passing the Electric Vehicle Rebates Bill is a great achievement for Australia that shows our country is finally behind the wheel and taking this issue seriously,” he said.

“Combined with much lower running costs, this move will make driving an electric car the most affordable option for many Australians.”

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