Australians buying a fully-electric car would miss out on tax breaks should Peter Dutton win next month’s election.

The Opposition Leader has indicated he would scrap Labor’s incentives designed to encourage workers to buy an EV through a novated lease, where the total financing and running costs of the car can be deducted from taxable income.

This is done through a salary sacrificing scheme where employers provide goods and services to staff in lieu of salary, keeping them in a lower tax bracket.

Anthony Albanese‘s Labor government removed the requirement for employers to pay a fringe benefits tax if they provide an EV to a staff member under the $91,387 luxury car tax threshold for fuel efficient vehicles.

This policy has proven popular, with 100,000 people taking it up since the policy was introduced in July 2022, with the benefits flowing chiefly to richer motorists.

Mr Dutton on Wednesday indicated he would scrap Labor’s policy – only two days after promising to keep it. 

‘The Coalition will: unwind Labor’s taxpayer-funded and badly-designed electric car subsidies, saving upwards of $3billion over the forward estimates and $23billion over the medium term,’ he said in a media release.

Climate Change and Energy Minister Chris Bowen had estimated Labor’s fringe benefit tax exemption on EVs would save an employer $9,000 on a $50,000 Chinese-made Tesla Model 3, while an employee would save $4,700 through a salary sacrificing arrangement. 

Mike Daly, a customer education specialist with novated leasing firm Smartgroup, said that unlike petrol car drivers, EV motorists could claim all their expenses on tax as part of a salary sacrificing package.

‘Petrol and diesel cars, for most cars it would be about half of all of your costs, including the finance payments will be taken off your taxable income,’ he told Daily Mail Australia.

‘The federal government, they have an incentive which means if you were to salary package an electric vehicle, it’s now 100 per cent pre-tax – so all of your finance payments, all of your electricity, registration, insurance, servicing, tyres.’

Mr Daly himself is salary packaging a $60,000 BYD Seal on a three-year lease.

‘So, that’s what I’ve done – I’ve got that on a three-year lease; it’s 100 per cent pre-tax,’ he said.

The inclusion of running costs on tax means someone on a six-figure salary, paying a marginal income tax rate of 30 per cent, can save $10,000 annually by forgoing some salary and receiving an EV that has effectively no running cost. 

‘It’s not unusual for our customers leasing an EV to be saving more than $10,000 a year in tax, because if you’re paying tax at 30 per cent, and you’re reducing your taxable income by $30,000 a year, because you’re salary packaging all of the costs for a car, then you’ll be saving about 10 grand a year,’ Mr Daly said.

The Australian Financial Review estimated the policy was costing $560million a year to exempt one in three drivers from the fringe benefits tax. 

The Productivity Commission in 2022 warned tax breaks for EV purchases would benefit the rich without increasing the number of electric cars on Australian roads.

Back then, when the Tesla Model 3 and Model Y consistently made the top ten on the monthly sales lists, there was no lack of demand, so had supply been greater, the number of EVs on the road would have naturally increased without any need for taxpayer-funded incentives.

‘With supply the principal constraint to greater EV uptake in Australia, policy efforts to increase the demand for EVs, such as tax concessions and rebates for EV purchases or leases, run the risk of subsidising people who are already in the queue, simply adding more people to the queue, or in the case of tax concessions that are selectively available to some groups, pushing those selected groups to the front of the queue — with little impact on the overall number of EVs on Australian roads relative to what would have otherwise been the case,’ it said.

The National Automotive Leasing and Salary Packaging Association estimated 100,000 Australians had taken out a novated lease between July 2022, when the tax breaks began, and February 2025.

The fringe benefits tax exemption was legislated in November 2022. 

The Opposition has already promised to scrap Labor’s New Vehicle Efficiency Standard, designed to reduce average new car emissions by 59 per cent over four years.

New compliance requirements are being enforced on July 1, which means car makers that sell too many petrol or diesel cars and not enough fully electric or hybrid cars will have to pay penalties, with the costs ultimately passed on to motorists.

Australia’s top selling car, a Ford Ranger with a diesel engine, would cost $6,150 more compared with $2,720 for a petrol Toyota RAV4, Federal Chamber of Automotive Industries modelling showed.

In another political showdown with Labor over cars, the Coalition has also vowed to halve fuel excise to 25.4 cents a litre for a year, which would save a Toyota RAV4 SUV driver $14 on their weekly fill-up. 

The Coalition’s vow to scrap EV subsidies and vehicle emission reduction standards could make it harder for the Liberal Party to regain Teal electorates in Sydney and Melbourne that were lost in 2022. 

These wealthy areas have a higher proportion of electric vehicles, and Melbourne businessman Simon Holmes a Court and his Climate 200 group are funding 35 candidates across Australia. 

The BYD Shark 6, a plug-in hybrid ute, was Australia’s sixth most popular vehicle in March, with 2,810 sold ahead of the fringe benefit tax exemption for plug-in hybrid electric vehicles expiring on April 1 this year. 

Tesla sales have plunged with 1,725 Model Ys sold in March 2025, less than half the 4,379 level of March 2024, Electric Vehicle Council figures showed.

This was after chief executive Elon Musk’s close association with Donald Trump turned off potential buyers who are particularly concerned about climate change.