The inquiry into the transition to electric cars has caused a plea from the car finance industry to extend the tax benefit to aid sales of anticipated cars.
Pleas from the automotive finance industry to extend the Fringe Benefits Tax (FBT) exemption on plug-in hybrids (PHEV) are rife to aid sales of hotly anticipated cars like the Ford Ranger and BYD Shark, which are expected to land next year.
Ending the exemption of plug-in hybrid cars being charged the FBT will impede sales of highly anticipated models, a leading finance organisation has said.
FBT is a tax employers pay on certain benefits given to their employees, such as using a work car for private purposes. However, this is set to end on the 1st of April 2025, causing worries that the massive sales increase of PHEVs evident in the new car market will drop, therefore hampering how well inbound models will perform in the market.
PHEVs have been exempted from the FBT since late 2022 as the Federal Government incentivised the purchase of hybrid and electric vehicles (EVs) to decrease emissions.
The Federal House of Representatives’ Standing Committee on Climate Change, Energy, Environment and Water, met in Melbourne this week for the third hearing of its inquiry into Australia’s transition to electric cars. One takeaway was that the FBT exemption is having an immense influence on PHEV sales and members asked to extend the deadline.
“We believe the most urgent measure that this committee can consider is the extension of the FBT exemption policy beyond its current planned cessation date,” said Rohan Martin, CEO of the National Automotive Leasing and Salary Packaging Association (NALSPA).
“The FBT exemption is probably driving around 50 per cent of all the plug-in hybrid sales in Australia. That exemption is due to end the 1st of April next year. We believe that there will be a demonstrable decline in plug-in hybrid vehicle sales if that happens.
“The timing is also wrong. Next year we’re going to see the likes of the Ford Ranger PHEV, BYD Shark, Mitsubishi Triton PHEV. In the next year or two, you’ll see a number of the larger vehicles that we Australians drive come in plug-in hybrid form.
“Without that particular exemption in place, the take-up of those vehicles would be nowhere near what it otherwise could be. We think that that will be a significant benefit in terms of decarbonisation, particularly helping regional Australia to have a far bigger role.
“Importantly the FBT policy is specifically enabling for the very first time many ordinary, working Australians to purchase a zero-emission vehicle, thereby helping Australian motorists to reduce their carbon footprint.
“Without it, there’s no doubt our transition to lower transport emissions would be slower. It needs to continue for a significant period of time.”
The Ford Ranger PHEV is expected to arrive on Australian shores in early 2025 while the BYD Shark is due sometime in 2024. The Mitsubishi Triton PHEV has yet to be confirmed for Australia.
In July 2024, there were 2,209 PHEVs sold nationally compared to 965 in the same month last year. In 2024, there have been 10,432 PHEVs sold so far, an increase of 129 per cent.
According to Mr Martin, NALSPA observed that PHEV uptake is five to six times higher than what it was two years ago, before the introduction of the FBT exemption.
It’s estimated that approximately 40 per cent of all EVs purchased in Australia since mid-2023 have been facilitated through salary sacrificing/novated lease arrangements, an increase from two per cent in early 2022, before the introduction of the exemption.
One benefit of PHEVs include having no range concerns as these cars use a combination of petrol and electric power. For those in rural Australia, this has played an important role in helping people decide whether or not they should buy an electric car.
However, two committee members questioned why the government should subsidise PHEVs at all.
Queensland MP Bert van Manen, representative for the constituency of Forde, asked NALSPA, “why do we need governments to get involved in continuing to mandate or push this? Previous technologies of all sorts haven’t required government subsidies or government interventions in the market, why don’t we just let the market take course?”
While Deputy Chairman, the Honourable Dr David Gillespie MP for Lyne in NSW, added: “I just see people in hospitals or schools thinking: why should we subsidise people so they can swan around in an EV ute? In my part of the world, it’s a minuscule proportion of people that have EVs that use their vehicle for their job.”
Mr Martin replied, “The amount [of incentive offered through the FBT exemption] has been determined at the level needed in order to decarbonise.
“Prior to the introduction of the exemption, our penetration rate was at around about two per cent. The cost of getting to an EV as we just talked about was the significant barrier and the lack of range of vehicles that Australians drive. If we believe in climate change and the need to decarbonise… it’s a necessary requirement.”
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