The Australian government has announced changes to its electric vehicle (EV) tax incentive, aiming to save $17 billion over the next three years. The policy, which currently provides a full exemption from fringe benefits tax (FBT) for eligible EVs, will be extended in full until March 2027. After that, only EVs costing less than $75,000 will qualify for the full discount until April 2029.
From April 2029, the incentive will be reduced to a permanent 25% FBT discount for all EVs below the luxury car tax threshold, currently set at $91,387 for fuel-efficient vehicles. Treasurer Jim Chalmers and Energy Minister Chris Bowen stated that the changes are designed to encourage manufacturers to offer more affordable EVs in the Australian market.
The scheme's popularity has led to significant cost blowouts. Originally projected to cost $605 million over seven years, Treasury now estimates it will cost $10.1 billion over the same period. The government's adjustments are expected to save $17 billion, according to the Grattan Institute.
EV sales have surged amid rising fuel prices linked to the Iran war, with EVs accounting for 15% of new car sales in March, double the share from a year earlier. Prime Minister Anthony Albanese defended the policy, noting that EV owners are unlikely to regret their purchase given current fuel costs.
