A budget fight now looms over the bill because the Coalition party room decided on Tuesday to demand changes to the bill as a condition for their support in parliament, raising the prospect of voting against the plan in the upper house.
The key disputes are the cost of the tax breaks, whether the money would be better spent on building charging infrastructure and whether there is any estimate from government officials on the reduction in greenhouse gas emissions.
“The Coalition has looked at this very closely and it’s just not good policy,” said Coalition finance spokeswoman Jane Hume.
“There are better ways to encourage the take-up of EVs, particularly building infrastructure.”
Hume said one of the Coalition’s concerns was that the biggest constraint was the supply of vehicles from overseas and that tax breaks in Australia would not overcome the supply problems.
Electric Vehicle Council chief Behyad Jafari said supply was an issue but the incentives were needed to encourage adoption and cut carbon emissions.
“What these incentives do is reduce emissions and there’s a value that comes from that, reducing pollution and reducing our reliance on petrol and diesel,” he said.
Labor does not need the Coalition’s support in order to pass laws in the upper house but would have to turn to the Greens and independents to secure 13 votes from the crossbench to legislate the tax breaks.
Prime Minister Anthony Albanese promised the incentives in the Labor election platform but the Coalition MPs argued on Tuesday that the full cost was only revealed after the election when the Parliamentary Budget Office calculated the impact over a decade.
The policy would exempt eligible vehicles from import tariffs, cutting the retail price for all buyers, and would also exempt them from fringe benefits tax, making them cheaper for employers when included in salary packages for staff.
To be eligible, the vehicle must cost less than the threshold for the Luxury Car Tax, which is currently $71,849 for most cars but is $84,916 for fuel-efficient and zero-emission vehicles.
This would exclude high-end electric cars, although the Tesla Model 3 has a base price of $63,900.
The Senate inquiry asked Treasury officials about the likely impact on carbon emissions but was told the government did not model the potential reduction. There was no estimate on the cost of the incentive for every electric vehicle purchased. The bill sets up a review after the first three years of the policy.
Labor unveiled the plan on May 1 with estimates from the Electric Vehicle Council that a $50,000 model such as the Nissan Leaf would be at least $2000 cheaper from the removal of the import tariff.
Labor also estimated the exemption from fringe benefits tax would save employers up to $9000 a year on the vehicle costs and that staff would benefit as well.
Australians bought 95,256 new passenger cars, SUVs and commercial vehicles in August, up 17.3 per cent from the same month last year, thanks in part to record arrivals of Tesla vehicles from the company’s factory in China.
Tesla is now one of Australia’s best-selling cars, coming in fourth in sales by volume after the Toyota HiLux, Ford Ranger and Toyota RAV4, according to the Federal Chamber of Automotive Industries.
The Parliamentary Budget Office analysed the policy and found it would cost $45.9 million in its first year but this cost would double by 2025 and double again by 2027.
It said this would cost $4.5 billion over the decade to 2033 in foregone tax revenue.
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