Are you thinking about buying, or have you already bought an electric vehicle? If an electric vehicle is on your wish list, then you should be aware of the tax implications and government policy that may affect your vehicle and impact your wallet.
It seems that we are in a transitional phase in motor vehicle history. We are seeing a shift from internal combustion engine cars (ICEs) and hybrid models, to fully electric vehicles (EVs). Some believe it is still too early to purchase an EV and some have already ‘taken the plunge’, committing to these vehicles as the way of the future. No matter what vehicle you drive right now, it may be an inevitability an EV is in your not-too-distant future.
There has been recent controversy about taxes on EVs, which vary depending on the state an EV is registered in. The controversy is related to the taxes that ICE drivers currently pay, in the form of a fuel excise per liter of fuel purchased, and whether a new tax should be applied to EV drivers, given that they have no need to purchase fuel and thereby do not contribute to the fuel excise.
The following is a summary of each state and whether they have applied an ‘EV tax’:
Queensland – No tax currently announced.
New South Wales – No tax currently, but plans on introducing a 2.5 cents per kilometer (for EVs) and 2 cents per kilometer (for plug in hybrid vehicles) tax in about July 2027 (or whenever EV sales reach 30% of new vehicle sales, whichever comes first).
Victoria – As of July 2021, EV drivers have been charged a 2.5 cents per kilometer tax.
South Australia – No tax currently, though a proposed 2.5 cents per kilometer tax was intended to take effect in July 2021, which was delayed to July 2022, and has now been delayed again to July 2027 (or whenever new EV sales make up 30% of all new car sales).
Western Australia – No tax currently, but plans on introducing a 2.5 cents per kilometer (for EVs) and 2 cents per kilometer (for plug in hybrid vehicles) tax in about July 2027.
Northern Territory – No tax currently announced.
Tasmania – No tax currently announced.
Australian Capital Territory – No tax currently announced.
The controversy over the EV tax stems from the argument that the fuel excise, which was 44.2 cents per liter until a recent cut by 50% intended to last until 28 September 2022, is required to raise revenue for governments to maintain roads and infrastructure. The argument for an EV tax puts forward that if no alternative tax is applied to EV drivers, then it is the ICE drivers who are solely contributing to the maintenance of roads and infrastructure. Accordingly, the argument is that EV drivers should be charged an amount scaled to their amount of road usage, on a per-kilometer basis, to contribute in place of the fuel excise, a ‘road user charge’ as named in Victoria.
A counter argument to the EV tax is that the revenue collected from the fuel excise is contributed to the consolidated revenue fund. The revenues generated from the fuel excise are not necessarily earmarked to be spent on roads and infrastructure. It is for this reason that in the 2020 to 2021 financial year, $ 12.72 billion was collected in net fuel excise and $ 8.88 billion contributed to land transport expenditure.
In an assessment conducted by the World Economic Forum in 2019, it was found that Australia’s transport infrastructure was ranked 38th on the list, having fallen from 18th in 2015. The shortfall of Australia’s road and public transportation network, despite the significant amount of taxes collected from the fuel excise, support an argument that an EV tax is not required for maintenance of roads and infrastructure; rather, an EV tax would only serve as another taxation mechanism that collects revenue without fulfilling the purpose that justifies its existence.
No matter what your position is regarding whether EV drivers should be subject to a new tax, you should be aware of the relevant taxes that apply in your area. In any case, the EV taxes that have been announced, or have already been implemented, appear to be at much lower cost than the fuel excise.
Policy – Incentives
The shift towards EVs seems to be guided by advancements in technology and innovation, and also a motivation to address climate change and move to zero-emissions transportation. State governments have largely supported EV policy by offering incentives to increase EV sales as a percentage of new vehicle sales. In 2021, EV sales in Australia consisted of about 2% of all new vehicle sales, up from 0.78% in 2020.
The following are some of the incentives being offered by governments to encourage EV uptake in Australia:
- Reduced stamp duty – $ 2 per $ 100 up to ,000 100,000, and $ 4 per $ 100 of value thereafter. For ICEs, this amount is 6 per 100.
- A purchase rebate of $ 3,000 for EVs with a purchase price of up to 58,000 (including GST). This notably excludes all models of Tesla vehicles.
- Currently developing a strategy to encourage a shift to zero-emissions vehicles, looking at other subsidies and funding to infrastructure.
New South Wales
- Stamp duty – $ 0 charged on new and used EV and hydrogen fuel cell vehicles purchased for less than $ 78,000 (including GST).
- A purchase rebate of 3,000 for vehicles priced below $ 68,750 (including GST). Only available for the first 25,000 EVs purchased from 1 September 2021.
- Stamp duty – EVs are exempt from the luxury vehicle rate of stamp duty, paying 8.40 per 200 of market value compared to 18 for ICEs. Only applies where the vehicle is worth more than $ 68,740.
- Registration discount of 100;
- A purchase rebate of 3,000 for vehicles priced below $ 68,750 (including GST). Offer currently limited to 4,000 EVs with an additional 16,000 to be announced in the near future.
- A purchase rebate of $ 3,000 for vehicles valued below $ 68,750 (including GST) registered from 28 October 2021.
- Registration free exemption for a 3-year period for EVs and hydrogen fuel cell vehicles.
- As of December 2020, an announcement to invest $ 18.3 million in South Australia’s electric vehicle charging network.
- Purchase rebate of $ 3,500 for vehicles priced below $ 70,000 (including GST) for 10,000 EVs, announced in May 2022.
- 22.6 million commitment to additional charging infrastructure in the 2022 to 2023 financial year.
- Stamp duty waiver for EVs valued up to $ 50,000 from 1 July 2022 to 30 June 2027.
- Waiver of registration fee for EVs from 1 July 2022 to 30 June 2027.
- Stamp duty waiver for EVs purchased both new and used between 2021 and 2023.
- 600,000 in grants to support the rollout of the EV public charging network.
Australian Capital Territory
- Stamp duty waiver for EVs purchased from 24 May 2021 and before 30 June 2024.
- Waiver of registration fee for 2 years, applying to EVs purchased from 24 May 2021 to 30 June 2024.
The significant subsidies being offered by state governments, and the strategies being developed to boost investment in EV public charging networks should assist in raising the uptake of EVs by the general public. Having widely available public access charging will also mitigate concerns or apprehension regarding the practicalities of EV ownership in Australia.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.