The federal government could axe or water down tax breaks for electric vehicles and home batteries as it looks to make deep cuts to the budget to battle inflation, according to multiple reports. 

Sources with knowledge of the government’s preparations for the December mid-year budget update told Nine newspapers that the measures could be “on the chopping block” as Labor looks for billions in savings. Social Services Minister Tanya Plibersek confirmed that the tax breaks are being “looked at by the cabinet” and “every dollar of spending has to be justified”.

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Prospective EV customers can currently make big savings by taking advantage of the government’s Electric Car Discount fringe benefits tax exemption. It applies to Aussies who buy an electric vehicle priced below $89,332 through means like novated leases.

Designed to encourage uptake of the cars in a bid to reduce carbon emissions, the discount allows owners to pay for their cars and their running costs out of their pre-tax income, which then reduces the amount of their income that can be taxed.

Due to the rapid increase in EV sales in Australia in the last few years, the cost of the discount has skyrocketed by around 1400 per cent since it started in July 2022. According to federal treasurer Jim Chalmers, there were only 56 EVs on the market at that time, rising to 160 by December last year. 

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The discount will change from April 1 next year to April 1, 2029. All EVs costing $75,000 or less will keep getting the 100 per cent fringe benefits tax discount, while EVs priced above $75,000 will receive a 25 per cent FBT discount. After April 1, 2029, all EVs below the luxury car threshold will get the 25 per cent saving.

Plibersek backed the discount despite the soaring cost, saying, “I think electric vehicles have made a huge difference in the cost of living for many Australians and the changes that we made have actually brought down the cost of electric vehicles.”