Call to Extend Fringe Benefits Tax (FBT) Exemption for Plug-In Hybrid Vehicles (PHEVs)

Potential buyers of plug-in hybrid vehicles (PHEVs) have until April 2025 to take advantage of the federal government’s fringe benefits tax (FBT) exemption scheme. However, industry experts are urging the government to extend the program, highlighting its role in promoting the transition to electric driving.

Currently, the FBT exemption applies to both PHEVs and electric vehicles (EVs) priced under $91,387, which are purchased through novated leases. The scheme has been a key factor in boosting sales of low-emission vehicles by offering significant savings. Essentially, the government absorbs the cost of the employer’s fringe benefits tax, which would otherwise be passed on to the employee.

PHEVs: The Gateway to Fully Electric Driving

Despite the rise in EV and PHEV sales, these vehicles still make up a small percentage of the overall market. Last month, PHEVs accounted for just 2.5 per cent of new vehicle sales, while EVs made up 6.4 per cent. Industry advocates, like the National Automotive Leasing and Salary Packaging Association (NALSPA), believe PHEVs are essential stepping stones toward fully electric driving.

“PHEVs are a practical solution for motorists who want the benefits of lower running costs and emissions but still need the security of a conventional engine for longer trips or when charging isn’t available,” says NALSPA chief executive Rohan Martin.

Martin also notes that the growing availability of PHEVs across popular body styles is making these vehicles more appealing to Australian consumers. Upcoming models like the BYD Shark 6 and Ford Ranger PHEV are expected to attract buyers interested in dual-cab utes that combine electric power with petrol flexibility.

The Role of the FBT Exemption

The FBT exemption has made PHEVs more affordable for Australians, particularly for those living in outer suburbs and regional areas where longer drives and limited charging infrastructure can be challenges. “Our data shows PHEV uptake is increasing among everyday working Australians, as these vehicles suit their driving needs,” Martin adds.

Extending the FBT exemption, according to NALSPA, is crucial to encouraging more Australians to embrace PHEVs and begin their transition to electrified, low-emission driving. “PHEVs allow motorists to start their electrification journey earlier than they otherwise would, supporting Australia’s efforts to meet emissions targets.”

A Growing Market

The Australian PHEV market is gaining traction, with 15,546 units sold between January and September 2024 – a 120.5 per cent increase compared to the same period last year. Much of this growth can be attributed to the BYD Sealion 6, which launched in June and quickly captured 20 per cent of the PHEV market. In September alone, the Sealion 6 accounted for 45 per cent of all PHEV sales, and it’s expected to overtake the Mitsubishi Outlander PHEV as the best-seller by the end of the year.

With the upcoming arrival of the BYD Shark 6 and Ford Ranger PHEV, experts expect further growth in the PHEV market. However, despite this rise, PHEVs remain one of the slower-selling powertrain types in Australia, still far behind petrol and diesel vehicles.

The Road Ahead

As Australia moves toward its emissions reduction goals, support for low-emission vehicles will be critical. Extending the FBT exemption could help ensure that more Australians have access to affordable, environmentally friendly vehicles that suit their needs. For larger vehicles like dual-cabs and utes, PHEVs may offer the best bridge to fully electric driving.

What do you think – should the FBT exemption for PHEVs be extended beyond April 2025?