Electric vehicles just got thousands cheaper for ordinary Australians. YE$$$$$$

On the fence because the cost of EV ownership has been a barrier? With your ordinary salary, new legislation means that electric vehicle might finally be affordable. Here’s the recipe for Australia's cheapest EV omelette...

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I normally don't jump out of bed to talk about legislation, but in this case it is actually pretty exciting.

The Albanese government managed to pass a thing called the Treasury Laws Amendment: Electric Car Discount Bill 2022 on Monday, 29th November - through both Houses - so it's legislation now. It's also backdated to the 1st of July, 2022, in case you were interested.

According to the government:

The bill exempts certain electric vehicles from Fringe Benefits Tax for eligible vehicles. This will result in a significant cost reduction.

Let's talk about that which electric vehicles are eligible, which are subjected to Fringe Benefits Tax and how can you leverage this to buy the EV that you've been fantasising about.

Should your next car be electric? Is it all over for internal combustion? >>

If Hyundai pulled its finger out to supply cars to Australia, the Ioniq 5 would absolutely fall under the threshold.

Firstly, this is for battery electric vehicles and plug-in hybrids (PHEVs) under about $85,000. It's actually $84,916 which is the Luxury Car Tax threshold for fuel-efficient vehicles in Australia.

Sorry, Nissan, your e-Power X-Trail misses out >>. And as for PHEVs, here’s the truth about buying a plug-in hybrid. Is it worth the money?

The reason it's such a seemingly dodgy not-round number is because it's indexed every quarter or every year (whichever) and it goes up by whatever the inflation rate is, therefore it's never a round number. But if you just bookmark in your head that the vehicles have to be under just shy of $85,000 for them to be amenable to this new legislation, then you're in the ballpark.

Secondly, it has to be under a salary sacrifice/novated leasing arrangement. They're the same thing, salary sacrifice and novated leasing, because that's where the Fringe Benefits Tax imposition takes place. It's not as complex as it sounds.

If you're on a salary you are pretty much eligible for a novated lease or a salary sacrifice car, you've just got to line up a financier and your employer and everyone has to buy in. But nothing else really needs to line up for you to get this sort of arrangement up and running. You don't even have to use the car at all for business use, this can be 100 private use and you still get the tax benefit, which is kinda unheard of.

(I’d suggest, if you can take advantage of this new situation, and if it makes economic sense, and your financial adviser gives it the green light, it could be an opportune moment, because I suspect: Electric vehicle prices will soar. Here's why…)

The way I read the legislation, it represents (roughly) up to a $6000 windfall if you're the right person, and it essentially means that a car like a rear-wheel drive Tesla Model 3 is going to be about the same price as a Toyota Corolla SX hybrid. Meaning, the same price in the context of the impost on your take-home pay - the reduction in your take-home pay in exchange for one of those two cars.

Let's not forget that the Model 3 is just shy of $70,000 whereas the SX Corolla hybrid is like $37K, something like that. This is a way of stimulating mainstream EV acquisition, and if you're the right person it's a no-brainer.

Now, for expensive EVs over that quasi-$85,000 threshold, the standard Fringe Benefits Tax imposition is going to pertain, so the government's not really backhanding the rich too hard here, because if you're going to buy a $100,000 EV, you're going to pay the full whack of FBT.

But if you want one of these more affordable EVs, then it just got a whole lot more affordable. So, should you buy an electric vehicle in 2023? >>

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DISCLAIMER

A quick disclosure for the sake of transparency here: I ran the numbers with Novated Leasing Australia (nla.com.au) and I dealt with them in researching this because I know the guy who owns it.

He's actually the same dude who got me into the whole new cars business - so I've known him for well over a decade and I know plenty of the NLA consultants as well: they are absolutely on the money and I feel completely confident reporting to you the numbers that they quoted me on this, because I trust them and I know who they are.

You can look up Novated Leasing Australia and see for yourself how much you could be spending to land a new EV in your driveway.

THE NEW ELECTRIC CAR MENU

Looking at the Tesla Model 3 and Toyota Corolla SX hybrid again, in the scenario of an $80,000 salary for people like you and 20,000 kilometres of annual driving. You don't have to be the Chief Operating Officer of the company, you can just be an ordinary employee and you can see how this plays out.

It's actually $208 a week out of your take-home pay for the Tesla and $209 for the Corolla. So technically less for the Tesla, but a dollar a week, let's call it the same. But let's focus on the difference in the price, because it's $68,000 for the Tesla and $38,000 roughly for the Corolla SX hybrid.

This puts the previously out-of-reach expensive and better-performing EV on a virtually level playing field in terms of outright cost to you.

The PHEVs, if you want to have the capability of plugging in to use the electric-only propulsion method, that part of the deal is going to be phased out in 2025. This happened because the government had to do a deal with The Greens and also Senator David Pocock to get this legislation across the line. They both wanted to put more pressure on internal combustion.

EVs and climate change deception. We're trashing the benefit >>

But foreseeably the stimulus for electric cars is going to be indefinite into the future, at least until some other person in the government turns this legislative instrument around.

If you want to buy a conventional car with a novated lease, you're on 100K and the vehicle costs 74K, then the benefit to you from novated leasing/salary sacrificing is about $3800. If you want to do exactly the same thing with a battery EV or a plug-in hybrid electric vehicle, the benefit to you is more like $9800. That's a massive inversion of the status quo - $6000 difference.

If you're on a lower salary, like $60,000 and you want to buy a BYD Atto 3, the take-home pay reduction (from what you get now to the take-home pay that you will get) will be $157 per week. That's a massive leg-up from the government.

If you're on an $80,000 salary with a Tesla Model 3 in mind (the rear-wheel drive Model 3 we just talked about), the difference in your take-home pay between no Tesla in the driveway and 100 per cent a Model 3 in the driveway, is $208 per week. And it's going to cost you the same to put a hybrid Corolla in the driveway. Which would you rather see in the driveway? Exactly.

These are both examples that are based on a five-year lease and 20,000 kilometres driven per year, just for complete disambiguation.

The plan for 1 million EVs by 2027 is bullshit: Here's why… >>

If you’d like a box set of vehicles that this new legislation applies to - the Fringe Benefits Tax exemption - they include:

• BYD Atto 3 - includes the extended range version it's under the price threshold (Check out: Should you buy a 2023 BYD Atto 3 electric car in Australia? >>);

• Tesla Model 3

• MG ZS EV (Check out: Should you buy an MG in Australia? >>)

• Nissan Leaf - including the e+

• Hyundai Kona Electric (Kona EV: what's living with a battery-powered SUV really like? >>)

• Mini Cooper EV

• Polestar 2 (Check out: Polestar 2 EV loses Space race: But does anyone care? >>)

So it's not like there's a hard choice of one or two cars - it's a bunch and you can choose the one that you like or whichever suits you best on objective criteria.

Also, try to find an EV with Vehicle-to-Load capability: V2L - DO NOT buy an EV without considering this! >>

For more details on novated leasing and how it pertains to electric cars, including the terms and conditions of going down this path, watch the full video report above.

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