Car expert Paul Maric said the end of the FBT exemption for PHEVs couldn’t have come at a worse time. (Source: Instagram/Getty)
The fringe benefits tax exemption for plug-in hybrids (PHEVs) ends this week, despite experts begging for it to be extended. The 2022 policy served as a financial incentive for drivers to dump their internal combustion engines (ICE) and hop on the electric vehicle (EV) bandwagon.
It helped shave tens of thousands of dollars off the cost of buying a PHEV, and, despite its success, the government has committed to ending it on Tuesday, April 1. CarExpert.com.au founder Paul Maric told Yahoo Finance that PHEVs had become the perfect middle ground between ICE cars and EVs.
“People are switching away from electric vehicles to plug-in hybrids,” he said.
“It’s the worst time possible for this kind of thing because the people just don’t want to buy electric vehicles and they’re going to be removing the only real subsidy that is currently sort of gaining traction.”
Research released in October showed that 61 per cent of PHEV owners bought their cars specifically because of the FBT exemption.
Additionally, 90 per cent said the tax break made a “big difference” in their decision.
The data from the National Automotive Leasing and Salary Packaging Association also found PHEVs were the perfect “stepping stone” between an ICE and a battery-powered electric vehicle (BEV).
It’s because PHEVs gave drivers the best of both worlds.
They can use petrol on longer journeys where they might have range anxiety or worries about where the next charger might be, and then they can switch to the battery for short trips.
That’s why Maric said it was such a shame that the FBT exemption was being dumped tomorrow.
“When you do the sums on it, you can actually go down the path of buying a $20,000 to $30,000 more expensive electric vehicle and still have it cost the same as a cheaper vehicle once you take into account the tax benefits that you get out of it,” he told Yahoo Finance.
Several peak industry bodies begged for the FBT exemption to be extended well beyond April 1 as the electric car sector continued to find its feet in the market.
They’re worried that removing incentives will cause more people to stick with or switch back to an ICE vehicle.
“We know the FBT exemption is an important tool that is helping more Australians afford and access the latest EVs,” Electric Vehicle Council policy head Aman Gaur said.
PHEVs have been growing in popularity, according to the Australian Automobile Association, with 7,556 sales in the December quarter, compared to 4,476 a year earlier.
However, BEVs have stagnated.
There were 21,331 sales in the last three months of 2024, compared to 21,474 in 2023’s December quarter.
National Automotive Leasing and Salary Packaging Association chief executive Rohan Martin said removing the tax cut was a “lost opportunity”.
“Once the bulk of people move into a plug-in hybrid, they’re on their electrification journey,” he said.
Back in October, the government revealed that PHEVs would no longer be considered “a zero or low emissions vehicle” under FBT law and therefore wouldn’t be “eligible for the electric cars exemption”.
The only people who will be exempt from this change will be those who continue to have a “financially binding commitment” that was in place before the April 1 deadline.
That type of commitment is what’s known as a novated lease.
Plug-in hybrid cars have helped many switch from petrol or diesel vehicles to low or zero-emissions ones. (Source: Getty)
There are a few ways to ensure that the FBT can still apply to you after April 1:
Optional extensions to your agreement, but it has to be for a pre-determined period of time.
Breaks in novation agreements, however, the car cannot be used or available for personal use during that time off
Changes to the financial obligations under the lease, which include alterations to lease payments or the residual value of the car
Changed employer for FBT purposes, as that results in a new commitment to the application or availability of the car by the new employer
Other changes in the pre-existing commitment for your PHEV on or after April 1, then the FBT exemption will no longer apply.
Ending the exemption means car owners will likely have to fork out more for their payments, and their balloon payment at the end could be higher than expected.
Maric said the second-hand PHEV market could soon be flooded with cars as people seek to offload their rides.
He also said the tax change could see a shakeup in the EV industry.
“I think we’re going to see a big shift towards regular hybrids,” he said.
“People realise that that is the type of vehicle you need to buy if you want to protect your re-sale value, and if you still want the benefits of having a fuel and energy efficient vehicle.
“Stepping up to a plug-in hybrid or even an electric vehicle, you’re adding the complexity of having these batteries and then the charging equipment.
“Whereas with a hybrid, we’re seeing them hold their value extremely well, and anything electric at the moment is depreciating.”
