Warwick Cathro
Secretary, ACT Branch
2 December 2020
Introduction
In June 2018 the Senate, on a motion by Senator Storer, established a Select Committee to inquire into the use and manufacture of electric vehicles in Australia. Senator Storer was appointed to Chair the Committee. The ACT Branch of the Australian Electric Vehicle Association (AEVA ACT) decided to make a submission to this Inquiry. I had joined AEVA the year before, and I volunteered to edit a submission, working with a group of interested Branch members.
Our submission
In our submission we noted the well-known benefits that flow from widespread EV uptake, both for the motorist (low running costs, good performance, ability to charge in a variety of locations) and for the community (abatement of greenhouse gas emissions, elimination of other emissions that impact on public health, improved national fuel security). And we noted some drawbacks: high purchase prices, time to charge and impact on government revenue from fuel excise.
Our key recommendations were:
- that the Federal Government publicly acknowledge the above benefits, and actually advocate for EVs
- that the Ministerial Forum on Vehicle Emissions develop an EV “roadmap” for Australia, similar to the plan developed in New Zealand
- that the Federal Government announce and implement a fuel efficiency target of no greater than 105g/km, as it had canvassed in 2016-17
- a range of tax measures (discussed below) as incentives for EV take-up
- a co-ordinated program to purchase EVs for government and corporate car fleets
- improved planning to fill gaps in charging infrastructure
- consultation with stakeholders, including the building industry, on the home charging needs of apartment dwellers.
We set out appropriate roles for governments at the national and state/territory levels, and urged a stronger role for the Council of Australian Governments (COAG) in developing nationally consistent policies to stimulate EV take-up. (We did not anticipate that, less than two years later, COAG would cease to exist).
Labor’s ambivalence
The Australian Labor Party’s attitude to this Inquiry was puzzling to us. Its representation was led by Senator Kim Carr from Victoria, a longtime champion of Australian manufacturing. Carr’s questioning of witnesses revealed deep scepticism about the future of electric vehicles. At the first public hearing, he told the witness from Tesla that his company was “grossly overvalued”. (Since he made that statement the value of the company increased by 700%). He scorned claims made about the role of EVs in reducing emissions, citing the dominance of coal in the electricity market in most Australian states. He queried the life and replacement costs of EV batteries.
In the final report of the Inquiry, Carr and his Labor colleague (Senator David Smith) opposed any early financial measures to encourage EV uptake. “An approach that merely subsidises the purchases of people who are already well off is unfair. The strategy must account for the driving and purchasing decisions of every day Australian families. There is no law of nature that can achieve price parity between EVs and internal-combustion-engine vehicles. If it is to be done, it will be done as a result of sustained scientific, engineering and technical effort by skilled white-and-blue-collar workers”.
Taxes – impact on purchase price
Taxation issues figured in this Inquiry, and need to be discussed Given that the upfront cost of an EV is the biggest barrier to take-up, many proposals to promote the adoption of EVs involve temporary exemption from taxes.
The purchase price of a vehicle is influenced by the following taxes:
- Goods and Services Tax (GST)
- Import tariffs
- Luxury Car Tax (LCT)
- Stamp duty (State/Territory Government).
All of these taxes, except the last, are imposed by the Federal Government.
Following a lead from the AEVA national submission, our submission argued for the exemption of new EV purchases from GST for defined period, or until EVs reach a defined percentage of the national car fleet. Such a measure could be regarded as an alternative to purchase rebates.
A Passenger Vehicle Tariff of 5% is imposed on vehicles entering Australia from non-Free Trade Agreement countries, such as the European Union. Senator Storer proposed exempting EVs from import tariffs, as part of a fiscally balanced package of tax changes (see below).
Our submission noted that the Luxury Car Tax imposes a lower tax burden on fuel efficient vehicles, but that this differential had been eroded over the previous decade, “diminishing whatever encouragement there has been to prefer a luxury EV over a luxury petrol or diesel vehicle”. We argued for the abolition of the LCT for EVs but said that “we would alternatively support a restoration of the difference in tax levels which prevailed in 2009”.
Senator Storer commissioned modelling of a package which would increase revenue from the Luxury Car Tax, by narrowing the definition of a fuel-efficient vehicle, lowering the threshold for standard vehicles, and indexing both thresholds on the same basis. In this package, these budget savings would be spent on incentive measures such as exempting EVs from import tariffs and the Fringe Benefits Tax, co-funding with states and territories to reduce registration and stamp duties for EVs, and grant funding for charging infrastructure.
Our submission recommended that “other State and Territory governments emulate the ACT policy of exempting all new EV sales from stamp duty”.
Taxes – impact on running costs
While EVs have significantly lower running costs than petrol or diesel vehicles, they can be impacted differently by operational taxes which affect the Total Cost of Ownership of a vehicle. These operational taxes include:
- Registration fees (State/Territory)
- Fuel excise (Federal) or a Road User Charge if it applies
- Fringe Benefits Tax for employer-provided vehicles (Federal).
Our submission urged other State and Territory governments to emulate the ACT policy of discounting annual registration fees for low emission vehicles, and urged all of these governments to ensure that EV drivers are not penalised by the greater tare weight of their vehicles.
Fuel excise is the most significant operational tax imposed on petrol and diesel vehicles. Effectively, it is a preference to EV drivers. Our submission stated: “we accept that these [EV] drivers must also contribute to the costs of Australia’s roads. We favour continuing a fuel excise at a lower level, and supplementing it through a per-kilometre levy applied to all vehicles. This would simultaneously discourage people from purchasing petrol and diesel vehicles which have negative environmental and health impacts, while also fairly charging all road users for the maintenance of the national road system.”
Senator Storer wanted a Road User Charge to be phased in over five years commencing in 2025. He did not specify how the existing fuel excise would be impacted by this change. But no doubt he did not anticipate that several otherwise progressive state Governments would seek to introduce an EV-only Road User Charge in 2021.
On Fringe Benefits Tax, an issue is that the overwhelming majority of fleet operators use the Statutory Formula Method of calculating the taxable value of a vehicle, because the alternative Operating Cost Method requires logbooks and administrative overheads. This commonly used method disadvantages vehicles with a higher capital cost but lower operating cost, such as EVs (see Climate Works Australia and collaborators, The path forward for electric vehicles in Australia, April 2016, pages 28-31). Senator Storer wanted to exempt EVs from Fringe Benefits Tax for seven years.
The outcome
In the end, the Committee declined to make any recommendations about taxes or about financial incentives for EV uptake. The only Committee members to support taxation changes were Senators Storer (Independent), Rice (Australian Greens) and Patrick (Centre Alliance).
The Committee did however support the following useful measures:
- development of a national EV strategy to facilitate and accelerate EV uptake
- a national plan for charging infrastructure
- Introduction of the 105g/km fuel efficiency standard
- a consumer education campaign on the capabilities and benefits of EVs
- a national 10-year EV manufacturing roadmap
- national training arrangements for automotive service technicians in relation to EVs
- a plan for upgrading electricity infrastructure to manage the EV demand
- amendments to the National Construction Code to render all new dwellings “EV charger ready:”.
The Committee declined to support Senator Storer’s suggestion of a target for EVs to represent 25% of light passenger motor vehicle sales by 2025, and his suggestion of a mandate for 50% of Commonwealth car fleet to be EVs by 2025-26. It declined to support any grants schemes for charging infrastructure, manufacturing or R&D. And it declined to recommend that all EVs be eligible for independent importation.
In his supplementary comments, Senator Patrick described the report of the Committee as “a lost opportunity to accelerate the uptake of EVs”. Senator Rice said that the recommendations “lack the necessary ambition“. And Senator Storer said “I am disappointed that Senators from the Labor and Liberal parties were not prepared to go further”.
Final comments
The unenthusiastic stance on EVs taken by the Labor representatives in this Inquiry contrasts strangely with the advocacy of EVs which the same party took to the Federal election just 6 months later. But both the Inquiry and the election result, coming on top of the Government’s two-year silence on fuel efficiency standards, added up to a major setback for the prospects of EVs in Australia.
Is there a way forward from here? Given that the Federal Government has backed away from its 2019 election promise of a national EV strategy, there does not seem to be any obvious advocate in the Parliament, apart from Senators Patrick and Rice, for the recommendations of this Inquiry – even though these recommendations were unanimous.
The Inquiry also highlighted the extraordinarily ad-hoc nature of vehicle taxes in Australia. This ad hocery was compounded two years later by the decisions of some State Governments to impose an EV-only Road User Charge. What is sorely needed is a comprehensive review of Federal and State/Territory taxes on the purchase and operation of vehicles. Such a Review should clarify the underlying aims of these taxes and their relationship, if any, to wider issues such as climate change policy, public health policy and the funding of transport infrastructure.
Note: This is the third article in a series discussing EV policies (and politics) in Australia. The next article in the series will deal with the 2019 Federal Election.