Generous tax breaks are available for the purchase of electric vehicles.

 

Q: I want to buy an electric vehicle but my husband says they’re too expensive. How do I get the best deal?

The wisdom: The federal government and some states offer attractive incentives and tax breaks to prospective EV owners, says James Gerrard, founder and financial adviser at FinancialAdvisor.com.au.

“One of the biggest tax breaks you can get these days is by purchasing a brand new electric vehicle or plug-in hybrid,” he says.

From July 1, 2022, the federal government’s electric car discount bill has allowed employees to salary sacrifice for an electric vehicle using their pre-tax income.

Under the novated lease arrangement, people can deduct the cost of finance and maintenance of an EV from their pre-tax salary.

No logbook is required and no fringe benefits tax is payable.

“It is the most tax-effective way to fund a motor vehicle,” Gerrard says.

The purchase price of the EV must be below $89,332 to qualify, and it must be a new electric vehicle or plug-in hybrid.

If you are looking to purchase a plug-in hybrid under the scheme, you must do so before April 1, 2025, although all other electric vehicles will continue to be eligible after this date.

There are also various state-based incentive schemes. In the ACT, until June 30, 2024, all new and used zero emissions vehicles are eligible for two years of free registration and are exempt from stamp duty.

Rebates schemes are also in place in Queensland, South Australia and Western Australia but have expired in NSW and Victoria, reportedly with low take-up rates.

Some companies have novated lease calculators that estimate savings according to income, vehicle cost, length of lease, etc.

“When arranging the novated lease agreement to purchase an EV, the first step is to contact the HR or payroll department at your workplace and check if they allow employees to take out a novated lease,” Gerrard says.

“The workplace will usually have a preferred provider, and you can then work with them to spec the vehicle you want and work your way through the terms of the lease.

“You will need to select a term of the lease between one and five years. Most popular is three years and the longer the lease, the lower the monthly repayments, but the higher the total amount of interest paid.”

Gerrard advises self-employed people to shop around with the various finance companies offering EV novated leases, because the difference in interest rates can be up to 10 per cent.

Also review the terms of the novated lease quote, and query items that you are not familiar with, he says.

“Things such as dent protection, wheel repair and other types of insurances add to your monthly lease cost but may not actually provide a great benefit after you drill down and see what is covered,” he says.

So, how much money will an EV save compared to paying for petrol?

There are EV savings calculators available, like the one hosted by Macquarie Bank. Users can compare the cost of owning an EV with a petrol, diesel and hybrid vehicle.

“While the purchase price of an electric vehicle can be higher than a petrol or diesel equivalent, the ongoing running costs are generally cheaper thanks to fewer servicing requirements and lower fuel costs,” the bank says.

Got a money-related problem around friends, family and relationships that you need help with? Please email mswise@afr.com. We will get experts to answer your question and keep your name and details anonymous. This week’s Penny Wise is written by Joanna Mather.

This article is for general information purposes only and is not intended to be financial product advice. You should always obtain your own independent advice before making any financial decisions.

Extracted in full from: https://www.afr.com/wealth/personal-finance/how-to-get-good-deal-on-an-ev-20231214-p5erkz

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