The Tax Benefits of Electric Cars

With the increasing pressure to reduce greenhouse gases many people are touting the environment benefits of electric cars. However, part of the decision to purchase an electric car is a financial decision as well – and the financial impact of purchasing an electric car will be significantly impacted by the taxes and tax incentives of electric cars.

Stamp duty

Stamp duty, or transfer duty, applies to both electric cars and combustion engine cars in WA. Once a vehicle cost’s more than $50,000 the transfer tax (stamp duty) on the car purchase is 6.5% of the excess.

This compares to other states like Queensland where the cost of transfer tax is 2% for electric (and hybrid cars) up to $100k and 4% thereafter. NSW is offering a stamp duty exemption for new and used electric cars. In Melbourne Victoria the rate of stamp duty is is 4.2% on luxury electric cars compared to the ordinary rate 9%.

Luxury car tax

The luxury car tax is normally factored into the drive-away price from the dealer. However, it is worth noting that LCT is at the rate of 33% for non-fuel efficient cars with a value in excess of $69,152 compared to electric cars that have a threshold of $79,659.

The GST rate of both electric, hybrid and combustion cars is the same rate of 10%. Remembering that the goods and services tax is a refundable cost if the car is used for work purposes.

Customs duty also applies to any vehicle imported to Australia. It is currently at the rate of 5%.

Income tax

If you purchase a vehicle you can enjoy a tax deduction for the cost of the vehicle up to $60,722 (2022) regardless of whether the vehicle is an electric car or not. However it is important to note that buses, small trucks (that can carry over one tonne in the tray bed) are not “cars” so are not subject to the depreciation cost limit.

Given the lack of electric cars that can be used for trucking, workhorses or buses the tax benefits of electric cars, from an income tax perspective, is not attractive.

If you are purchasing an electric car the simplest way to ensure the car is tax effective is to keep a valid log book for 12 weeks. And while the process is cumbersome the log book, once prepared, can be used for 5 years.

Charging infrastructure

While Western Australia does not offer any tax benefits for electric cars the government does have a strategy to create Australia’s longest electric vehicle fast charging station.

As an alternate example Victoria has a subsidy of $3k for electric cars under $68,750 and a $100 discount on annual car registration. In NSW, in addition to the $3k subsidy electric cars (for 25,000 cars) drivers can use transit T2 and T3 lanes.

Future tax strategy on electric cars

As everybody knows taxation is more of an outcome of politics than it is from business and finance. And with an upcoming election, the future tax benefits of electric cars should be considered as well.

The current government has no tax changes to how it treats electric cars (as of today).  Instead the current governments strategy for electric cars is to increase the electric infrastructure to make owning and operating electric cars easier.

We have heard budget rumours that there might be tax changes ahead for the electric cars. The government has had a lot of pushback a there is no national fuel emission regulations, tax incentives or subsidies to make electric cars more affordable.

The opposition party has announced a government fund to subsidise electric cars. They are also proposing to eliminate the import duty on non-luxury electric cars and to eliminate fringe benefits tax on electric cars. This proposal of course has not yet been introduced into parliament yet alone become tax law.

How do we compare to the rest of the world?

Sadly, Australia’s tax benefits, and particularly Western Australia’s tax incentives, are poor. In the UK the government will contribute up to 35% of the cost of the car (£3,500), cars under £40,000 are exempt from the annual registration and electric cars enjoy a 100% tax deduction on purchase.

What does Westcourt recommend?

Many of the team at Westcourt are Revheads at heart.  And everybody at Westcourt is interested in finance, business and money.

Sadly the two don’t mix that well.

The decision to purchase a car is very much an emotional one and it goes beyond finance and taxes.  And the tax incentives for buying an electric car, at the moment, are so non-existent that the cost of owning and operating an electric car is considered without looking at the special tax incentives that should apply.

If you are considering buying an electric car the Federal election might have a significant tax impact – but the ordinary tax considerations of a combustion engine car will apply to an electric car.  However these “ordinary” incentives does not mean that there is no opportunity – the presence of taxes like fringe benefits tax, remote worker accommodation, farming tax benefits and payroll tax impacts can all have an impact – and this is where Westcourt can deliver true value.

Given our single focus on one market  – families in business – and our excellence in taxation we are a natural choice for your next car, or car fleet purchase.  Call us today.

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