EV tax incentives Australia : Billions in tax savings are now at risk due to an Albanese government backflip — but there’s a major issue being ignored, and Australians are bearing the heavy cost.
OPINION: You’ve seen the headlines — electric vehicle (EV) tax incentives are costing taxpayers billions.
Government modelling shows the Fringe Benefits Tax (FBT) exemption for EVs, along with related perks, is projected to hit Australians with a $23.4 billion bill by 2036.
That’s an eye-watering figure, especially considering the policy only started in July 2022.
The Productivity Commission’s second report revealed the cost of the EV FBT exemption has skyrocketed from an original estimate of $55 million annually to a jaw-dropping $560 million, sparking calls to scrap the scheme.
But here’s the real question: what about the subsidies for big, diesel-guzzling utes over the past decade?
That number? It doesn’t even exist.
While critics rush to label EV incentives as “wasteful” or “too expensive,” Australia’s deep-rooted obsession with utes continues to fly under the radar.
Billions in Tax Savings at Risk Amid Government Backflip
These vehicles, which make up four of the top five best-selling models in Australia, are quietly reaping generous tax benefits — and the cost is falling on everyday Australians.
Under the country’s tax rules, commercial vehicles like dual-cab utes can qualify for a Fringe Benefit Tax exemption if they’re used “primarily” for work.
But the guidelines are so loosely defined that many owners use their utes for personal purposes, as long as it’s deemed “minor, infrequent, and irregular.”
In practice, most of these utes aren’t hauling tools or transporting tradespeople. They’re taking kids to school, towing jet skis, and parked in suburban driveways.
The Australian Institute reports there are 1.5 times more utes on the road than there are actual tradies, indicating that many are claiming a tax break for a so-called “tool of trade” that functions more like a spacious family vehicle.
Fringe Benefit Tax and Personal Use Loopholes
It’s not just the FBT — utes also dodge the Luxury Car Tax, even when their price tags soar well into six figures, simply because they’re classified as “commercial” rather than “passenger” vehicles.
This means you can buy a RAM 1500 and skip the LCT, while someone opting for a more efficient EV could face a hefty tax bill.
In 2023 alone, high-end American-style utes cost Australians over $250 million in lost Luxury Car Tax revenue, according to a report from the Australia Institute — and that doesn’t even include the revenue lost from FBT exemptions.
Rod Campbell, research director at the Australia Institute, said Australia is effectively subsidising “big, dumb utes by hundreds of millions of dollars each year.
These vehicles are damaging roads, compromising safety, and driving up emissions, yet they enjoy massive tax breaks,” he added.
I’m not downplaying the $23 billion in EV tax incentives — including FBT exemptions, import tariff relief, and other perks — but these measures are intended to make EV ownership more accessible and affordable, especially through novated leasing.
According to the National Automotive Leasing and Salary Packaging Association, over 100,000 Australians have opted for an EV novated lease since mid-2022.
These policies play a crucial role in making EVs more attainable, particularly given that their upfront costs are slightly higher than petrol or diesel alternatives.
EV tax incentives are also part of the Federal Government’s wider strategy to achieve net zero emissions by 2050, with the transport sector accounting for 20 per cent of the nation’s total emissions.
HALF-PREGNANT APPROACH
However, the Productivity Commission’s report now suggests abolishing the EV FBT exemption, claiming it’s too expensive and “duplicative” of the New Vehicle Efficiency Standards (NVES).
While the NVES may push automakers to bring cleaner cars into the market, that’s only part of the solution.
Without incentives for consumers to actually purchase them, little will change.
Both elements are essential: one drives supply, the other drives demand.
As the Federal Chamber of Automotive Industries (FCAI) pointed out, without ongoing consumer support, “current buying preferences will inevitably result in significant penalties.
Automakers can’t simply absorb these costs; they may be forced to raise prices on popular models, limit availability, or even leave the market entirely.
Countries that have achieved high EV adoption, like Norway, have consistently combined strict efficiency standards with generous consumer incentives.
Relying on only one approach usually slows progress.
So, if we’re serious about fairness and decarbonising the transport sector, shouldn’t we be considering the full picture?
So why is the ute loophole being overlooked? Could it be because it’s politically sensitive?
Highlighting the issue means challenging one of Australia’s most cherished vehicle types.
Tradies vote, and Australians depend on them.
If the Federal Government removes EV tax incentives while keeping the ute loophole untouched, it’s like switching off a single light and claiming a big victory for energy efficiency.
What’s needed is smarter policy and more thoughtful decision-making.
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