The new Federal Government delivered its first Federal Budget earlier this week. As is our tradition, we will bring you a comprehensive analysis in coming weeks as the announcements and their likely impact become clearer. But we thought we would let you know of one announcement that will be relevant to you if you are thinking of buying an electric car. In summary: talk to us if you are thinking of buying a new car!
The Budget announcements include what is being called the Electric Car Discount. There are two major elements to the announcement. The first is that imported electric cars will no longer incur a 5% import tariff. This tariff is imposed at the point of sale, so the sticker price of a new electric car should fall by 5% on the day the changes take effect.
The second element is probably more substantial in terms of increasing the number of electric cars on the roads. Businesses usually have to pay fringe benefits tax if they provide a car to employees that can be used for private purposes. This can be a real disincentive to businesses when it comes to providing company cars. Calculating FBT is very fiddly, but the ATO’s own tax calculator tells us that the annual FBT on a car worth $50,000 can create FBT of more than $9,700 in 2022/2023. This is, of course, a huge disincentive to buy cars for employees.
FBT will no longer apply to electric vehicles. The cheapest electric car costs around $50,000, so that $9,700 figure really comes into play.
The change will mean at least two things. Firstly, employers who provide cars to their employees will have a huge incentive to choose an electric car over a petrol/diesel fueled car. And secondly, more employers will have an incentive to provide cars to their employees.
Please remember that most self-employed people who use a company/trust to operate probably qualify as an employee of that company/trust. A lot of business owners can take advantage of this change.
The hope is that new cars will become cheaper due to the removal of the tariff and then more plentiful due to the removal of FBT. As the number of electric cars increases, so too will their acceptance and this should increase demand for them. The Commonwealth has also announced an increase in powering stations that they will provide, and there will also be a greater incentive for private providers to provide the infrastructure needed by electric cars.
There should also be a ‘flow through’ to the secondhand market as well, as over time more used electric cars will be offered for sale. This is important because second hand electric cars are currently very expensive compared to non-electric alternatives.
More detail will be released over the coming weeks, so watch this space. But if you are in the market for an electric car and you think these exemptions could apply to you, please don’t buy anything until you have spoken to us first.
Please note: This measure is not yet law. If enacted, this will apply from the FBT year beginning 1 April 2022.The Government intends to review this exemption after 3 years, to consider electric car take-up. (Source)