A taxpayer-funded electric vehicle tax break meant to help everyday Australians is increasingly benefiting the country’s highest income earners, as the cost of the scheme reaches into the billions.
Australian Taxation Office data obtained by the Australian Financial Review, via a Freedom of Information (FOI) request, reveals 30.6 per cent of drivers using the Fringe Benefit Tax (FBT) exemption earn more than $190,000, while another 24 per cent earn between $135,000 to $190,000.
That means more than half of all recipients are among Australia’s top income earners, despite the policy being initially pitched as a cost-of-living measure for middle-income households.
When the Federal government first introduced the electric vehicle (EV) FBT exemption in 2022, Treasury expected it would cost approximately $90 million a year and attract fewer than 5,000 users.
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Instead, as of March 2025, more than 100,000 motorists have taken advantage of the scheme, pushing the cost to $1.4 billion, with projections showing it could reach $3 billion by 2028-2029.
The policy allows workers to salary-package EVs under the luxury car tax threshold, currently $91,387, and pay for them using pre-tax income, delivering thousands in annual savings.
But as the ATO data reveals, savings are largest for those on higher incomes.
Kia Australia chief executive officer Damien Meredith, whose brand has benefited from rising EV sales, said the exemption should be scrapped.
“There’s a bit of a middle-class welfare going on, and I think it’s just inequitable,” he said.
Mr Meredith argues the policy distorts the market and fails to target those who need assistance most.
“If you believe in the free market, then you can’t have that sort of intervention,” he said.
Instead, Mr Meredith said government funding should have been directed toward charging infrastructure rather than subsidising vehicle purchases.
“I would like the government to commit to a long-term infrastructure plan for EV charging, done in a strategic manner, not in a shambolic manner,” he said.
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The e61 Institute has found that the structure of the policy means higher-income earners receive larger effective subsidies for the same emissions reduction.
Research manager Lachlan Vass told the Australian Financial Review that undermines the reason for the policy.
“This policy is giving a bigger subsidy to higher-income people for the same car. That doesn’t make sense,” he said.
Data from the Grattan Institute also reveals the imbalance, with 4.4 per cent of Australians earning more than $190,000, while the majority earn less than $105,000.
At the same time, the Australian electric vehicle market is shifting rapidly, driven not be tax but by rising fuel costs.
A surge in global oil prices linked to conflict in the Middle East has pushed petrol prices sharply higher in recent weeks, accelerating the uptick of EVs.
Electric vehicles accounted for 14.8 per cent of new car sales in March, a record high, while demand in the used market also surged.
Mr Meredith said the spike shows a powerful shift at play.
“What’s made the difference is that there’s been a shock, an oil shock,” he said.
“Every time there’s an oil shock, it changes the behaviour of how consumers think.”
He said the current shift mirrors past crises.
“1973 was an oil shock, people stopped buying big American cars, and they started buying small Japanese cars,” he said.
“People aren’t buying as many ICE cars; they’re buying EVs because of what’s happening with fuel pricing.”
The numbers at Kia reflect that, with the auto giant seeing 40 per cent electric, 30 per cent hybrid and 30 per cent ICE.
In January, EVs accounted for just 10 per cent of the brand’s sales.
Ahead of the May budget, the government has been signalling it would likely tweak the scheme rather than scrap it.
The exemption is now likely to be scaled back either by means-testing or lowering the vehicle price threshold.
