How the government’s lofty net zero EV target is helping make us broke

I genuinely nearly fell out of my chair when I read that the federal government somehow managed to miscalculate how many Australians would flock to a tax ‘loophole’ that nets them a new car and helps reduce their tax bill by up to $20,000 per year.

Announced in 2022, the Treasury Laws Amendment (Electric Car Discount) Act 2022 allows taxpayers to purchase a new fully electric or plug-in hybrid vehicle under a private novated lease and skirt the requirement to pay Fringe Benefits Tax.

This is a tax typically paid by employees when they receive fringe benefits, such as pre-tax vehicle repayments and operating costs, and the exemption potentially saves people up to around $20,000 per year in tax.

The FBT exemption, concocted by the government to help achieve its lofty ‘net zero’ CO2 target, was meant to cost taxpayers around $55 million in the 2024-2025 period according to the Australian Financial Review.

Instead, a tax expert says it has cost $560 million.

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Yes, you read that right, the government somehow miscalculated this by a factor of more than 10.

If that happened to any CEO in any business, they’d be shown the door before they had enough time to utter the words “But what about net zero?”

The Labor Party’s Powering Australia Plan calls for a 43 per cent reduction in emissions by 2030 and net zero by 2050.

The logical thing would be to make internal-combustion, non-electrified vehicles more expensive, thus creating an incentive to buy an electric vehicle (EV) – though the government is doing this too, with another poorly thought out ‘tax’ called the New Vehicle Efficiency Standard (NVES).

But instead, a bright spark in the Australian Labor Party thought they’d incentivise those who can afford to spend up to just over $91,000 on a new car by giving them a tax offset.

This is in a period in which cost of living pressures are causing some families to give up luxuries, and in some instances even the basics, to pay their bills and put food on the table.

Have you tried visiting a public hospital lately, or calling an ambulance? Better yet, have you seen the state of youth crime in our major cities thanks to a crumbling public education system?

Can you imagine how much community good you could do with over $550 million per year in federal government funds? The schools you could build, the teachers you could employ, the hospitals you could staff.

It’s outrageous to me that we’re lining up to help middle-class Australians who can comfortably afford to pay thousands of dollars per month on a new car with a tax break.

This obsession with achieving net zero at absolutely all costs results in brain-dead policies like this making it past the keeper unchecked until somebody bothers calling the government on their PR spin.

People often paint Norway as net zero nirvana – with sales of fully electric vehicles accounting for at or over 90 per cent of new car sales most months. It creates a great headline, but let’s put some of that into perspective.

Norway’s new car market fluctuates between 100,000 to 200,000 vehicles per annum.

The Norwegian government also spends around US$4 billion each year on electric vehicle subsidies – historically this has been a mix of VAT elimination, purchase subsidies, no tolls and free parking.

Some of these subsidies have now been wound back, but the gist is you’d need to have rocks in your head to spend over US$20,000 more for an equivalent internal combustion car.

Norway can fund this absurd level of subsidies thanks to its sovereign wealth fund. It’s funded by the country’s oil and gas production and it sits at around US$1.5 trillion.

The fund equates to around US$250,000 per resident, so it’s not hard to see how a country like this with such stored wealth can use a percentage of that per resident to cover electric vehicle subsidies.

If we were to do the same in Australia – extrapolating US$4 billion to our car market of around 1.1 million new cars – you’d be looking at an investment of US$20 billion, or around A$31 billion. That’s around 55 times more than the current amount we spend.

Norway can get away with that level of spending because it doesn’t have a set of broke state governments and a seemingly incompetent (at maths, anyway) federal government, apportioning money to the wrong places.

To put that number further into context, last year the Australian Government dished out around $14.5 billion in fossil fuel subsidies to eligible Australian businesses.

It shows you how insane the target actually needs to be for us to get anywhere near Norway’s level of EV adoption.

Before you clutch at your pearls regarding the amount spent subsidising fossil fuels, remember that it’s these industries – such as mining, aviation and small business – that contribute to putting food on your table, transporting goods around the country and, ironically, supplying the majority of the electricity used to power your home and, you guessed it, charge your EV.

To be fully transparent, I was one of these tax ‘loophole’ chasers as our Model Y was purchased on a novated lease.

This opinion piece isn’t a swipe at the people taking advantage of this FBT exemption – I’m all for minimising the amount of tax you pay – this is entirely about how absurd this is from a national standpoint when there are countless other things $550 million could be spent on right now.

We’re also now on to our fourth EV as a family. I have absolutely nothing against the technology. You’re welcome to drive whatever the hell you want. This is primarily an issue with a government that just doesn’t get it.

If we were in a position where we could comfortably walk into a hospital and be seen without extended waits (or at least not be sent home), or send our children to a public school in any part of the country knowing the result would be a decent education, then yes please – shower us with EV subsidies.

Until then, stop this madness. There’s absolutely no reason to divert this much money into helping middle-class Australians who have sufficient disposable income to buy a new electric car worth up to around $91,000.