If Labor is serious about electric vehicles, fixing the fringe-benefits tax is the next step

EVs offer a green and practical way to slash emissions, but that depends on policies promoting their wider adoption. Photo: Getty

Energy Minister Chris Bowen on Friday nudged a little closer to making Australia take electric vehicles seriously, but Labor is not there yet.

If it were serious, it would drop the government’s annual billion-dollar subsidy for fossil-fuel cars through the novated lease rort.

Ever since the Abbott/Hockey opposition took the salary-packaging
industry’s money (a $250,000 donation toward the Liberal Party’s 2013
election campaign) and the Shorten opposition subsequently rolled over
as well, I’ve used the political parties’ maintenance of the inequitable and wasteful novated lease lurk as a test of their fiscal integrity.

Both parties continue to fail.

The salary-packaging industry overall is a dubious proposition – it means some people get to exploit tax-minimisation tricks that others are denied. That’s hardly a healthy basis for a fair and reasonable tax system.

And it is very costly for the Commonwealth. Just “structuring” the fringe
benefit tax (FBT) and GST aspects of car leasing for a minority of employees is costing the rest of us a billion-or-so dollars a year.

To keep its carbon reduction promise, the government needs Australia to catch up with other advanced countries on electric vehicle penetration.

A first step was dropping the fringe benefits tax (FBT) on employer-supplied EVs. Ticked. It helps a little, but given how much more expensive EVs presently are, not much.

While there are FBT exemptions available for carbon-burners (including the ubiquitous utes that are Australia’s biggest-selling models), there’s not a comparative advantage.

The second step will be meeting advanced-nation standards for average
vehicle emissions, as signalled by the Climate Change and Energy
Minister on Friday. Mind you, Chris Bowen only promised a “discussion paper” at this stage – and real reform will have to fight a powerful and well-connected lobby before it comes to pass.

A step waiting to be taken

It’s another step, but continuing tax breaks for fossil fuel vehicles means
government policy working against itself. Dropping all tax breaks, lurks and advantages for the carbon-burners is the obvious third step the government has not been game to signal, let alone take.

But to be really serious, there’s the fourth step: using the tax system to
apply both carrot and stick – advantages for zero emission vehicles,
penalties for fossil fuel users.

That is being submitted to a current Senate committee inquiry into a
parliamentary bill that will “amend tax legislation to encourage a greater
take up of electric cars by Australian road users by making electric cars
more affordable, and to reduce Australia’s carbon emissions from the
transport sector.”

There’s many a slip twixt Senate committee recommendations and
legislation. The nature of the Greens/Pocock balance of power in the
Senate plus the Greens/Teals moral pressure and potential threat in the
House of Representatives might yet counter the lobby for the status quo.

Monash University business law and taxation lecturer Diane Kraal is
scheduled to appear before the committee on Thursday to flesh out a
submission from a joint Monash-Griffith University research project into
boosting the EV fleet.

Zero emissions or nothing

The 11 recommendations would end all tax breaks for fossil-burners, including hybrids – it’s zero emissions or nothing for a tax subsidy.

The cost to the budget of tax breaks for EVs would be covered by
removing them for fossil fuel vehicles and applying FBT on a sliding
penalty scale based on emissions – the more carbon burned, the higher
the rate of FBT.

The Monash-Griffith project targeted fleet managers as the pathway to
getting more EVs on the road, as more than 40 per cent of new light
vehicle sales are to businesses. These are vehicles that then tend to be rolled over into the private second-hand market after a few years, encouraging wider adoption.

Having an FBT break for EVs to exploit would calm the salary-packaging
industry, which nonetheless remains fundamentally inequitable.

The 2013 Labor policy of scrapping novated leases would have shrunk
said industry. With unemployment so low, this is an opportune time to
move to a policy based on principle rather than political donations and
threats.

Opportunity is knocking in this political cycle – if there are those with the
ticker in government to answer.