Tens of thousands of electric vehicle drivers with novated leases would be hit with thousands of dollars in out-of-pocket costs when they change jobs if the Albanese government extends cuts to its signature EV tax break.
Since July 2022, when the tax cuts started, about 100,000 people have leased an EV or plug-in hybrid, far more than first expected.
Treasurer Jim Chalmers is seeking to rein in blowouts from the fringe benefit tax waiver for EVs after a tenfold increase in the program’s cost, from $55 million forecast in 2024-25 to $560 million – or $1.9 billion to $5.1 billion over the four-year budget forecasts.
While FBT is usually paid by an employer, employees cover the expense by making after-tax payments to offset it. Under the current rules, people who lease EVs through work receive an FBT waiver. For leasing a $60,000 EV, the saving is close to $12,000 a year.
Options to reduce the cost of the ballooning program include phasing out the tax break, lowering the EV eligibility threshold from $91,000 or axing the program altogether.
But business and unions have warned Chalmers and Climate Change and Energy Minister Chris Bowen EV drivers could face being whacked with hundreds of dollars in extra fortnightly costs if they change jobs during a lease period, which is usually between two and five years.
EVs hit a record 11.8 per cent share of new car sales in February, before the US-led attacks on Iran began in early March, driven in part by speculation the government could cut back its lucrative EV tax break in the May budget.
People with plug-in hybrids already face higher costs when they change jobs. The government ended the FBT waiver on PHEVs on March 31, 2025, meaning novated leases signed after that were no longer eligible for the discount.
The Tax Office even outlines how this will cost workers, including those recently made redundant at Atlassian and WiseTech due to AI, using the case study of “Courtney”, who was made redundant with a novated lease.
“Courtney starts new employment. The new employer agrees to a novated lease arrangement for the same vehicle. The end date of the lease remains unchanged. Courtney’s new employer isn’t entitled to the FBT exemption for the vehicle,” the ATO said in an example on its website, adding that the case would be the same if she had quit to move to a new employer.
One poster on the ATO’s community forum said they found this out the hard way when moving from one government department to another. “The financial impact is huge. This doesn’t sound correct or within the spirit of the policy,” the person wrote.
Rohan Martin, chief executive of the National Automotive Leasing and Salary Packaging Association, urged Labor to consider the issue of job changing if adjustments were deemed necessary.
“Should there be some form of change, the government must include transitional protections so existing EV leaseholders who, for example, change employers for tax purposes, still benefit from the full FBT exemption policy,” Martin said.
Effect on productivity
Electric Vehicle Council chief executive Julie Delvecchio echoed this call. “Any changes to the electric car discount should be approached carefully because the devil will be in the detail and poorly designed changes could create unintended consequences.”
Electrical Trades Union national secretary Michael Wright wants the FBT waiver to remain in place but said any changes should not act as a brake on people’s ability to change jobs.
“People should not be penalised for changing jobs. They should not be handcuffed to a bad employer because they bought a car in good faith,” he said.
People’s ability to easily change jobs, also known as labour mobility, has a strong positive correlation with better productivity. Boosting the nation’s weak productivity is a key goal of Chalmers’ fifth budget.
“I’ll be working up a number of reform packages for this budget and they’ll be focused on savings, they’ll be focused on productivity,” he told Sky News on Sunday.
Trent Wiltshire, the Grattan Institute’s former deputy program director, in October wrote that when workers can more easily move into jobs where they are most suited and productive, “there is a large economic payoff”.
“Higher wages and productivity, and a more dynamic and prosperous Australia,” Wiltshire wrote in an article for The New Daily website.
Beyond the economic risk, there is also political risk for Labor.
Bowen noted in December that leasing data showed the strongest uptake of the tax break is in outer suburbs like Baulkham Hills in Sydney, Werribee in Melbourne, and Springfield in Brisbane where Labor, the Coalition and One Nation are expected to compete for seats at the next election.
The government is conducting a review of the scheme, which is due to be completed later this year.
Extracted in full from: https://www.afr.com/politics/federal/ev-owners-face-job-trap-if-labor-extends-cuts-to-tax-break-20260315-p5oalf
