Parliament is set to approve a tax discount for electric cars

A tax discount on electric vehicles is set to pass into law after the Federal Government reached an agreement with the Senate crossbench.

Here’s how it will work.

The tax discount

The discount will make electric car purchases exempt from fringe benefits tax.

That’s a tax employers pay on behalf of their employees for work-related ‘perks’. Employers often let employees buy a car using fringe benefits tax because it can save employees money.

Exempting electric cars would make the car purchase effectively income tax-free for an employee who buys an electric car through their employer.

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Which cars count?

The Government’s proposal applies to “zero or low emissions” cars purchased for private use, as long as the cars cost less than about $85,000 in this financial year. (For reference, a Tesla Model 3 costs between $65,000 and $92,000)

The wording “zero or low emissions” includes plug-in hybrid vehicles, which can use petrol. The Greens and Independent Senator David Pocock suggested an amendment that would remove the discount for hybrid vehicles after 2025. The Government has agreed.