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Nathan with his leased Tesla Model Y.


Bean Counters, Sharpen Your Pencils! New EV Incentives In Australia

Nathan with his leased Tesla Model Y.

Australian federal legislation to exempt electric vehicles from fringe benefits tax (FBT) is shortly going to pass parliament. Experts are discussing the impact that this will have on the composition of fleets. I turned to Nathan Gore-Brown, a Queensland-based industry consultant, for his take. Bean counters — sharpen your pencils!

Nathan already has a car on a novated lease. He estimates that he will save A$2,000 to A$3,000 a year under the new regime. His Model Y costs him A$900 per month. This covers maintenance and tyres but not electricity over the next 5 years. The new tax benefit will provide about 25–30% in savings.

The new legislation will make electric vehicles cheaper, but Australia is a supply-constrained market. He is expecting that wait times for new vehicles that are business-owned but privately used will increase.

Nathan anticipates that those who will benefit from the new legislation will fall into one of two groups. First, beneficiaries will be drivers who novate a lease through their employer to get a tax benefit by driving an EV, or who salary sacrifice to package an EV. The other group will comprise those workers who are issued an EV at the discretion of their employer. For example, a sales representative may be given an EV. The reduction in cost to the employer could be up to 20% of the cost of the vehicle (so it could really just be the employer benefiting financially). However, there may be some unintended tax costs to the employee. The employee might be penalised for receiving extra income in the form of a vehicle. These issues are still being worked out. It is hoped that the “Tax Gremlins” will be sorted out by the end of the next financial year, with a patch to the legislation in the October 2023 budget.

Some entities, like councils, may receive savings, but those businesses that are already maximising their tax savings may not see much improvement to their bottom line. The bean counters are still sharpening their pencils.

Nathan believes that fuel efficiency standards currently being considered by the federal government will also help.

The people who will gain the most from the new legislation will be the individuals who are able to salary package an EV. However, here we discover another blocker — some salary package providers are refusing to include EVs in their offerings. As these issues “nibble on their playground lunches,” big business may be motivated to lobby for more tax law changes.

Andrew Kerr from iedge added: “the largest beneficiaries are going to be employers and employees able to purchase vehicles using a novated lease. By making electric vehicles FBT-free, all the costs of ownership and running costs are now paid for in pre-tax dollars even though the vehicle has little or no business use.

“So, in real terms, while an employee purchasing an internal combustion engine car under a novated lease with a purchase price of $74,000 will benefit approximately $3,800 per year, a PHEV or BEV with a purchase price of $74,000 will now benefit by approximately $9,800 per year, making the choice very straight forward.

“From a company fleet’s point of view, for vehicles with business use, the decision to purchase EVs and their charging has become a whole lot easier, as now charging stations can be installed in the workplace, and while it’s still yet to be clarified, it looks like the home charger can be installed in the employee’s home as an FBT-free expense. This all equals a cost and administration savings for the organisation and a cost and convenience benefit for the employee.

“This new legislation will clearly boost the number of new BEVs and PHEVs, and it will also create a secondary market as cars are rolled off leases in 1, 2 and 3 years time, providing affordable second-hand electric vehicles in the coming years.”

Nathan advises on fleet purchases to government and industry and has found several blockers to a massive surge in fleet EV take. Some fleet operators do not want to buy from unknown/new brands. Others object to cars purchased from China. Some just think that Teslas are too “out there” to be considered. Add this to the fact that EVs from established brands are available in Australia but only in small numbers and at higher prices and you have some serious issues to resolve.

In the end, it is my humble opinion that decisions will be made on the basis of financial gain. The profit motive will win out in the end.

I told Nathan that I was excited about the FBT changes and the possibility that we will see even more EVs on Australian roads. He told me that I am always excited! Then he updated his projections for EV penetration of the Australian market. He expects that 2022 will average out to about 4% penetration. This is with the monthly peak of 8% in September 2022 alone — caused by the landing of the Model Y. December is also expected to reach this peak. 4% in 2022 is double that of 2021, and he expects it will probably double again in 2023.

As the bean counters sharpen their pencils, and the tax lawyers paw over the new rules, hopefully carmakers will revise their export numbers and EVs will start pouring into the land down under.

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Written By

David Waterworth is a retired teacher who divides his time between looking after his grandchildren and trying to make sure they have a planet to live on. He is long on Tesla [NASDAQ:TSLA].


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