The government is rolling back the fringe benefits tax (FBT) exemption for plug-in hybrid electric vehicles (PHEVs) in just a few weeks. The exemption was introduced in 2022 to encourage more people to hop on the EV bandwagon.
Some are concerned that its removal on April 1 will reverse the EV market’s meteoric rise in sales over the last few years. CarExpert.com.au founder Paul Maric told Yahoo Finance that the looming deadline comes as the electric car industry hits a big juncture.
“While people are now switching away from electric vehicles to plug-in hybrids, 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,” he said.
“PHEVs are the best of both worlds. You can drive long distances without needing to charge the vehicle and not having that range anxiety.
“And you’re also getting the benefit of being able to drive with zero emissions if you are driving shorter distances.”
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, battery-powered EVs have stagnated. There were 21,331 sales in the last three months of 2024, compared to 21,474 in 2023’s December quarter.
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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.
There are a few ways to ensure that the FBT can still apply to you after April 1:
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Optional extensions to your agreement, but it has to be for a pre-determined period of time.
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Breaks in novation agreements, however, the car cannot be used or available for personal use during that time off
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Changes to the financial obligations under the lease, which include alterations to lease payments or the residual value of the car
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Changed employer for FBT purposes, as that results in a new commitment to the application or availability of the car by the new employer
