Warning for Australian electric vehicle owners as major deadline approaches

Scrapping a major tax exemption could change the face of Australia’s electric car industry forever – and cost EV drivers thousands of extra dollars.

From April 1, 2025, the Extra-legal Tax (FBT) exemption for plug-in hybrid vehicles (PHEVs) will be abolished.

Under the FBT law, PHEVs are no longer considered zero or low emission vehicles and only fully electric vehicles qualify for the exemption.

PHEVs have a combustion engine and a battery and electric motor, but unlike regular hybrids, have a much larger battery.

The FBT exemption previously applied to the personal use of electric vehicles financed under a renewed lease agreement or operated by a business.

This impending change comes at a crucial time for the EV industry, CarExpert.com.au founder Paul Maric said Yahoo Finance.

‘While people are now switching from electric vehicles to plug-in hybrids, this is the worst possible time for this kind of thing because people just don’t want to buy electric vehicles and they will get rid of the one and only cars. subsidy that is currently gaining popularity,” said Mr Maric.

The upcoming FBT change could also see the used market flooded with PHEVs as owners look to offload their vehicles.

Director of Content at Driving force James Ward told Daily Mail Australia he expected to see an increase in sales of PHEVs and EVs as more people understand the savings they can make with a renewed lease contract.

“So far this year, for example, BMW has sold almost as many i4 electric sedans as the 3 Series, its flagship midsize executive sedan.”

“Once the FBT exemptions end, buyers may re-evaluate their decision, especially for electricity,” Mr Ward said.

‘If you have to pay 20 percent more for an electric car than for an equivalent petrol car, the financial benefit is simply not there for many buyers. Especially if you can’t easily charge at home.’

He added: ‘Some of the advantages of the PHEV models, combined with their more competitive prices than petrol models, may continue to convince buyers.’

“Sales of pure hybrids, which are not FBT exempt, are growing significantly (87 percent year-on-year) due to the savings in everyday use,” Mr Ward said.

Compared to other engine types, fully battery-powered electric vehicles (EVs) have become extremely popular in Australia in recent years.

Fewer than 3,000 electric vehicles were sold in Australia in the second quarter of 2022, according to the Australian Automobile Association (AAA).

The FBT exemption for electric cars came into effect on July 1, 2022, with sales of electric cars increasing to more than 25,700 in the second quarter of 2023, Yahoo reports.

Since then, sales have stalled, with just 25,353 electric vehicles sold in the second quarter of this year.

Meanwhile, sales of plug-in hybrid vehicles are gaining momentum, with 1,894 units sold in the second quarter of 2022 and 4,675 units sold in the second quarter of 2024.

From the beginning of January to the end of September 2024, sales of PHEVs skyrocketed by 120.5 percent compared to the same period last year.

This is compared to hybrids (87 percent higher) and electric vehicles (6.6 percent higher).

The automotive industry is calling for the FBT exemption to be extended for PHEVs.

Rohan Martin, CEO of the National Automotive Leasing and Salary Packing Association, believes PHEV sales will decline as a result.

‘Without that incentive, we think sales will drop significantly, and for those considering switching to an electrified vehicle, we think it will likely discourage them, especially if they want a larger type of vehicle. Mr Martin told the newspaper ABC.

Motor Trades Association chief executive Matt Hobbs said the government should reconsider its decision to scrap tax breaks for plug-in hybrids.

“The government has set a challenge for the industry to decarbonise… Now that they have it, we need to give the industry the tools and consumers to be incentivized.”