Budget 2023: Upgrade your Prius, because benefits for hybrids are set to end by 2025

If you’re looking to buy a plug-in hybrid car over the next few years, we have a bit of bad news. You might not be eligible for fringe benefit tax exemptions.

While the federal budget is often about who is going to get what, it also reveals what’s being cut. The Jim giveth, the Jim taketh away. 

And in this case, Labor is sunsetting the eligibility of plug-in hybrids to receive the fringe benefits tax exemption for electric cars.

But you still have a bit of time. According to the budget papers, the change won’t come into effect until April 1, 2025.

And if you purchased a plug-in hybrid between July 1 2022 and March 31 2025, you will remain eligible for the Electric Car Discount.

Treasury estimates that this change will increase receipts by $30 million, as well as GST payments to the states and territories by $5 million over five years.

Exemption of fringe benefits tax, as well as import tariffs, was first introduced in the October 2022 budget. In fact, this was the first time that any Australian government had offered a federal incentive for EV adoption.

This allowed for any eligible electric car purchased after July 2022 to be exempt from these extra costs. At the time these included plug-in hybrid electric cars as well as hydrogen fuel cell cars.

The idea behind these incentives was to encourage the uptake of fuel-efficient cars. However, it is only applicable to EVs that cost less than the Luxury Car Tax (LCT) threshold.

The LCT has remained unchanged in this year’s budget.

Should we be cutting off interim solutions while EVs remain pricey and public infrastructure is still scarce?

The problem with this is that electric cars sold in Australia are still pricey, particularly in the current economic climate. 

A large portion of fully electric vehicles cost more than the $84,916 LCT. Even in the cases of the ‘entry level’  EVs — they’re still tens of thousands of dollars more expensive than their petrol counterparts.

The Motor Traders Association (MTA) has called for the abolition of the LTA for electric vehicles.

“The LCT was introduced in 2001 to encourage Australian consumers to purchase Australian-built vehicles, however, since 2017, Australia has not manufactured motor vehicles, making the tax redundant,” an MTA spokesperson said in a statement.

“The LCT is an inhibitor to the uptake of electric vehicles (EVs). A significant portion of EVs, including models in the Kia and Hyundai range, fall in the higher price bracket making them subject to the LCT. The LCT is a tax upon a tax.”

While the push by the government towards EVs is admirable — though years and in some cases decades later than other countries — I wonder if excluding plug-in hybrids from this incentive is the best course of action right now.

In addition to the continued expense of EVs, public and private infrastructure remains a problem. 

Sure, it has introduced the $275.4 million Driving The Nation Fund last year which aims to provide cheaper and cleaner transport across Australia.

And in this budget, it’s pledging $39.3 million to the National Roads and Motorists’ Association (NRMA) to help build 117 EV fast chargers across the country. It’s also spending $5.2 million over four years to develop national charging infrastructure, including retrofitting older multi-residential buildings with chargers.

Labor is absolutely trying here.

But it’s unclear how robust this public electric system will be by the time hybrids are removed from the fringe benefits tax exemption.

For many who are looking to drive something more sustainable, hybrids are a good middle ground while public chargers remain scarce — especially if they’re renting or live in apartment buildings where they can’t simply install their own charger.

As a car reviewer myself, this is a constant struggle every time I test fully electric vehicles. And I’m someone who loves them.

I hope I’m wrong on this one — seeing more public chargers across the country to combat range anxiety would be fantastic. As would cheaper sustainable vehicle options. But considering where the economy and cost of living is, I just don’t know.

To see SmartCompany‘s full budget coverage, click here.

Photo by Michael Fousert on Unsplash