If Labor cares about fairness, it will cut EV subsidies
The month of March saw a record 15,839 electric vehicles (EVs) sold, up 42% from February. As a result, 14.6% of all new car sales in February were EVs.
The SMH’s Victoria Devine argued that the EV Fringe Benefits Tax (FBT) exemption for novated leases under $91,387 is the main driver of EV sales.
However, this scheme is proving to be both very costly to the federal budget and highly inequitable.
The Australian Treasury had anticipated the sale of 4,700 EVs through the scheme. However, the actual uptake by March 2025 was 100,000.
Taxpayers spent $1.35 billion in 2025–26 alone, a figure likely to soar due to the fuel crisis.
Veteran economist Chris Richardson described the policy as “a very good way to make cars cheaper for rich people”.
Indeed, a report released last year by the Electric Vehicle Council lobby group revealed that 48.2% of EV buyers under a novated lease earned more than $150,000, significantly above the average income of $106,000 reported by the ABS.
Devine also contended that both new and used EVs largely price out lower-income households.
The end result is that lower‑income earners are effectively subsidising EV tax breaks for high earners.
Abolishing EV subsidies would save the budget billions and improve equity:
The Treasury estimates that the entire cost of the FBT exemption for battery EVs will be $9.7 billion between 2026-27 and 2029-30 and potentially $20 billion over the next decade. If fuel shocks persist and EV adoption increases, costs will rise.
Battery EVs’ running costs are further reduced because they are free from road user charges levied under the 52.6 cents-per-litre fuel excise, which rises twice a year as part of the biannual CPI indexation.
Yes, the fuel excise has been halved for three months, but it does not level the playing field.
Excise and customs duties on petrol, diesel, and other fuel products generated approximately $27 billion in revenue for the federal government in the most recent year.
Therefore, as drivers migrate from traditional combustion vehicles to battery EVs and hybrids, the revenue collected from the fuel excise will fall.
In short, subsidising battery EVs places a substantial strain on the federal budget at a time when it is already in deficit.
The Productivity Commission (PC) has urged governments to end EV subsidies.
“Now that the Australian Government has implemented the New Vehicle Efficiency Standard, it should phase-out the exemption of electric vehicles from the Fringe Benefits Tax”, reads the PC said in a recent interim report.
The report also advised that “state and territory governments should phase-out the exemption of electric vehicles from vehicle stamp duty and registration discounts”.
The PC has also stated that the FBT exemption is the most expensive method of carbon abatement, costing between $987 and $20,084 per tonne:
It is time for our governments to cease spending taxpayer money on private vehicle subsidies.
The vast majority of these subsidies go to wealthier inner-city residents, worsening inequality. They also cost the federal and state governments billions of dollars in lost tax revenue as they struggle with rising debt levels.
Finally, with petrol and diesel costs skyrocketing as a result of the Middle East war, Australian customers are financially incentivised to buy battery EVs even without government subsidies.
Let EV users pay the true costs of their vehicle purchases and charging.
Scarce taxpayer money should be used where it is most needed and benefits the most Australians.
