There are a number of ‘discussions’ in Federal Parliament at the moment around motor vehicles. Discussions which may have relevance for those considering buying an electric vehicle (EV) or luxury car. As there is a number of concurrent discussion and bills, the reports and commentary may be confusing for many in the general public. We do not purport to being in a position to provide full, in-depth coverage on these issues. We can however, provide an overview of current discussions and bills before Parliament re discounts for EVs and the luxury car tax with comments on the relevance for car loans.
EV Discount Bills & National Electric Car Strategy
On July 27, Treasurer Jim Chalmers in conjunction with the Minister for Climate Change and Energy, Chris Bowen, introduced to Federal Parliament a Bill to amend Treasury Laws in regard to electric car discounts. The Bill outlines the legislation to amend the FBT act and make eligible electric cars which are use is made available to the employees by their employer exempt from the tax.
The Treasurer said it was the plan of the Government to make EVs cheaper and as such more affordable for families. The exemption would be applicable to hydrogen fuel cell EVs, battery-electric models and plug-in hybrids.
Eligible cars would include those with a retail price which falls below the LCT (luxury car tax) threshold on fuel efficient cars. The threshold for the 2022/23 financial year is currently $84,916 for vehicles in use after 1 July 2022.
The statement provided an example of this amendment on a $50,000 car, provided to the employee by the employer which would represent a saving to the business of up to $9,000 pa on FBT. On salary sacrificing arrangements a savings of up to $4700 pa could be realised by individuals.
Price has been identified as a major barrier to the uptake of EVs. This FBT exemption is a part of the Electric Car Discount measures by the Government which are aimed at cutting the acquisition costs of EV ownership.
In addition to presenting the FBT exemption bill, the Treasurer and Climate Change Minister also introduced the National Electric Vehicle Strategy and changes which would remove the 5% import tariff on eligible EVs. At the core of this national strategy is introducing standards for fuel efficient and applying a tailpipe CO2 reduction scheme. This is seen as need to create a greater supply of EVs on the Australian market.
These bills go before the parliament for discussion and with the current make-up of both the upper and lower houses, the Government is facing some push-back. The Greens Party and David Pocock, independent Senator, have concerns around hybrids being included. As hybrids use petrol combustion engines as well as electric, the measure is seen as subsidy for fossil fuels. The Opposition is reported being against the Bill due to the huge cost to taxpayers.
Those interested may wish to follow discussion of this Bill in Federal Parliament.
Luxury Car Tax
The Luxury Car Tax (LCT) is a tax on the GST inclusive price of vehicles above a certain threshold. The threshold changes annually. According to the Australian Tax Office (ATO) the current rate is 33%. Buyers don’t have this added on to the advertised purchase price. LCT is imposed on importers and will already have been included in the price tag.
Fuel-efficient vehicles and zero emission models have a higher threshold than others and as such buyers get a saving. For vehicles purchased from the start of this financial year, 1 July, the threshold for LCT is $71,849 and $84,916 in the fuel-efficient category. So if you’re planning to purchase a luxury vehicle, selecting a fuel efficient model which comes into this category could represent a saving.
There has long been criticism of LCT from many circles and currently there is discussion around how dropping this tax could benefit the agricultural sector by opening up European markets to Australian producers.
It will be interesting to follow the progression of these discussions through the Parliamentary process.
Car Loans and Purchase Considerations
While discussion on the legislation around reducing the cost of EVs has been in the news lately, the appropriate process needs to take place before they are enacted. This takes time and then there is the timeframe for implementation. Then there is the matter of the application to timing of vehicles coming into the Australian market.
Taking all that in consideration, there could be a lag time before any changes to taxes and tariffs of EVs and luxury vehicles is reflected in the pricing. Timing that should be considered by potential buyers in regard to the purchase and to the finance.
Here are a few points to consider:-
- Prices of new vehicles have seen rises recently as a result of increases in inflation and componentry. The price increase faced by delaying the purchase with the hope of a tax reduction may need to taken in context.
- Any discount on the vehicle price will of course reduce the total car loan amount and as such reduce the monthly car repayment. To see how repayments may vary with different priced vehicles, refer to our commercial car finance calculator.
- Supply and availability is a key consideration. The supply situation is not expected to stabilise for some time. So acting now and securing current stock could ensure a purchase as well as side-step additional price rises.
- If FBT is made exempt on some EVs, that could represent a significant tax savings for some businesses and for some individuals. However, delaying purchases until these new laws come into effect may mean missing out on savings which may be realised on current financial year tax measures such as temporary full expensing with car loans for sole traders.
- Some lenders are offering finance deals for the purchase of fuel-efficient vehicles. As we are accredited with multiple lenders, we have the capability to bring the cheapest offers to our customers.
The interest in EVs is on the ‘up’ as shown in August sales figures and with our cheaper car loans a purchase of an EV may be an extremely affordable option while contributing to reducing emissions.
Contact Jade Car Loans at 1300 000 003 for affordable finance on EVs and luxury vehicles
DISCLAIMER: IN REGARD TO MISREPRESENTATIONS AND ERRORS CONTAINED IN THE MATERIAL AS PRESENTED, LIABILITY IS NOT ACCEPTED. THE DETAILS AND CONTENT IS PROVIDED FOR CAR BUYERS AND INDIVIDUALS AND BUSINESS SEEKING FINANCE PURELY AS GENERAL INFORMATION. THIS IS NOT PROVIDED AS THE ONLY SOURCE OF FINANCIAL INFORMATION. ANYONE THAT CONSIDERS THAT NEED FINANCIAL ADVICE ABOUT THEIR SPECIFIC REQUIREMENTS SHOULD SEEK THEIR OWN FINANCIAL ADVISOR.
