Senate debates

Thursday, 24 November 2022

Bills

Treasury Laws Amendment (Electric Car Discount) Bill 2022; In Committee

7:07 pm

Photo of Janet RiceJanet Rice (Victoria, Australian Greens) Share this | | Hansard source

There are two amendments that we are going to be debating tonight, both of which have been put forward by the Greens and by Senator David Pocock. I move amendment (1) on sheet 1746 revised:

(1) Schedule 1, page 5 (after line 8), at the end of the Schedule, add:

8 Review of operation of electric car disco unt

(1) The Minister must cause a review to be undertaken, in accordance with this item, of the operation of:

(a) the provisions of the Fringe Benefits Tax Assessment Act 1986 that are inserted or amended by this Schedule; and

(b) any provisions of the Customs Tariff Act 1995 that are inserted or amended pursuant to Customs Tariff Proposal (No. 5) 2022, which was moved in the House of Representatives on 2 August 2022 and of which notice was given by the legislative instrument numbered F2022L01001.

(2) The review must relate to the operation of those provisions, as so inserted or amended, during the 3 years from the commencement of this Schedule and, in particular, their effectiveness in encouraging the uptake of cars that are zero or low emissions vehicles.

(3) Without limiting subitem (2), the review must include consideration of:

(a) whether the operation of some or all of those provisions, as so inserted or amended, should continue; and

(b) what types of motor vehicles should be covered by the provisions.

(4) The conduct of the review must include consultation with the public about the matters to which the review relates.

(5) The review must be completed, and a report on the review must be given to the Minister, within 18 months after the end of the 3 years from the commencement of this Schedule.

(6) The Minister must:

(a) cause the contents of the report to be made available to the public as soon as practicable, and in any event within 28 days, after the Minister receives the report; and

(b) cause a copy of the report to be tabled in each House of the Parliament within 15 sitting days of that House after the Minister receives the report.

This is an amendment to review the operations of how successful this measure is actually going to be at increasing the use of electric vehicles. We've had a lot of debate during the debate on this bill about the effectiveness of this measure and whether this is the appropriate measure and the most effective measure to increase the use of electric vehicles.

As I said in my second reading contribution, the Greens are supporting this bill. It's a small step forward, and we believe there are much more significant measures that need to be taken to really kickstart the use of electric vehicles. But this is an important measure, and it's an important measure for be getting electric vehicles into fleets. It's an important measure to then be able to have electric vehicles flowing through as second-hand vehicles. But we thought it very appropriate, given there's a whole raft of different ways we could be supporting the use of electric vehicles, although we actually think that getting decent fuel efficiency standards and carbon dioxide standards is probably the most important thing to do, and we are hoping that the government will introduce something along those lines. In the meantime we thought it would be appropriate to have a review in place to determine whether this legislation is effective.

Basically, the review would occur after three years from the commencement and it would include consideration of whether the operation of some or all of these provisions should continue and what types of vehicles should be covered by the provisions. Of course, what types of vehicles goes to the point of the issue of zero-emission vehicles versus low-emission vehicles, which is in the other amendment that Senator Pocock is going to be moving. That amendment would phase out the plug-in hybrid electric vehicles being eligible for this discount after three years. We think that after three years it would be very appropriate to do that review, to make sure that this measure is being effective.

7:10 pm

Photo of Dean SmithDean Smith (WA, Liberal Party, Shadow Assistant Minister for Competition, Charities and Treasury) Share this | | Hansard source

The coalition will be supporting the amendment that has been proposed by the Greens senators and Senator David Pocock. Given the substantial cost of the measure to the budget over the medium term, it is essential that this proposal be reviewed rigorously. During the Senate inquiry into the legislation, the government could not outline any criteria that the policy's success or failure would be measured against. Given the alarming lack of policy analysis underpinning the legislation, it's important that it be subject to a thorough and wide-ranging review. While the coalition opposes the broader bill, we will support amendments to ensure that, if it does pass, appropriate safeguards are placed around the substantial costs of this measure.

Photo of Katy GallagherKaty Gallagher (ACT, Australian Labor Party, Minister for the Public Service) Share this | | Hansard source

The government will be supporting this amendment. It was our intention to review the legislation at about the three-year mark anyway. This simply puts that into the legislation and we're happy to agree with it.

Question agreed to.

7:11 pm

Photo of David PocockDavid Pocock (ACT, Independent) Share this | | Hansard source

by leave—I move:

(1) Clause 2, page 2 (after table item 2), insert:

(2) Page 5 (after line 8), at the end of the Bill, add:

Schedule 2 — Electric car discount: termination of exemption for plug-in hybrid electric vehicles

Fringe Benefits Tax Assessment Act 1986

1 Paragraph 8A(2)(b)

Omit "vehicle; or", substitute "vehicle.".

2 Paragraph 8A(2)(c)

Repeal the paragraph.

3 Subsection 8A(5)

Repeal the subsection.

4 Subsection 136(1) (definition of plug-in hybrid electric vehicle )

Repeal the definition.

5 Application of amendments

(1) The amendments of the Fringe Benefits Tax Assessment Act 1986 made by this Schedule apply to benefits provided on or after 1 April 2025.

(2) Despite subitem (1), the amendments do not apply to the application or availability of a car at a particular time (the relevant time) on or after 1 April 2025 if:

(a) the application or availability constitutes a car benefit because of subsection 7(1) of the Fringe Benefits Tax Assessment Act 1986; and

(b) before 1 April 2025, the employer, the employee, or an associate of the employer or of the employee, committed to the application or availability of the car, in respect of the employment of the employee by the employer, for a period that began before 1 April 2025 and includes the relevant time; and

(c) at no time on or after 1 April 2025 and before or at the relevant time did the employer, the employee, or an associate of the employer or of the employee, commit to the application or availability of the car, in respect of the employment of the employee by the employer, for a period that includes the relevant time; and

(d) before 1 April 2025 a car benefit relating to the car was provided; and

(e) the car benefit referred to in paragraph (d) of this subitem was an exempt benefit in relation to a year of tax because of section 8A (Exempt car benefits: zero or low emissions vehicles) of that Act.

I welcome this bill and the function it serves to create a second-hand EV market in Australia. This is much needed. Most Australians are currently priced out of the EV market. Incentivising EVs in this way for fleets will have flow-on effects to create that affordable EV market which will allow a number of people to get into it and unlock the cost savings that electric vehicles provide, both in terms of not having to fill them up with petrol at the servo but also in reducing maintenance costs.

While it's a great thing to incentivise EVs in this way, there is a concern with plug-in hybrid vehicles over the long term. The reality is that plug-in hybrid electric vehicles in fleets are not plugged in often and end up being used on the engine, which is a smaller engine, and, as has been pointed out many times, they are heavier vehicles. This drastically increases the amount of fuel that they use. This amendment will limit the problems with the plug-in hybrids. It has a sunset clause which provides certainty for fleets and people who are looking to get a vehicle. It ensures that we are moving towards the more efficient and newer technology of battery electric vehicles.

I thank the government and the Greens for the way in which they have approached this issue to reach this outcome.

7:13 pm

Photo of Janet RiceJanet Rice (Victoria, Australian Greens) Share this | | Hansard source

I also want to speak in support of this amendment. Obviously, the whole aim of this legislation is to reduce emissions from our vehicles and to shift to zero-carbon vehicles. As I said in my second reading speech, this is what we need to be doing so that our carbon pollution from transport can be reduced as much as it can be in as quick a time as possible. Including plug-in electric vehicles in this scheme was just going to continue—and not just continue but subsidise—vehicles which have ongoing and substantial use of fossil fuels. A report was done just this year by the International Council on Clean Transportation which showed that the use of petrol or diesel in plug-in hybrids is actually much greater than what the manufacturers claim. Rather than claim fuel consumption of about 1.6 litres per 100 kilometres, the real-world experience across Europe is that as these cars are being driven they're actually being driven on their petrol motor a lot more and ending up with fuel consumption of around four litres per 100 kilometres. So they are, in fact, a fossil fuel vehicle and certainly are not deserving of subsidies. Essentially, if we included plug-in hybrids in this legislation, it would be yet another ongoing subsidy for fossil fuels, which is the last thing we need when we should be doing everything we can to tackle our climate crisis.

We thought coming to the position of phasing out plug-in hybrid vehicles out of this scheme over three years was a reasonable compromise. Clearly, we do have an issue at the moment of a lack of supply of electric vehicles. The previous government was so recalcitrant and did nothing to encourage the uptake of electric vehicles that the vehicle manufacturers just said, 'Why would we bring electric vehicles to Australia?' It just has not been a good market for them. We know that for anybody wanting to buy a new electric vehicle at the moment, the wait time is six to 12 months. So we do have an issue with supply.

We are allowing plug-in hybrids to be included in the scheme, to encourage their uptake for the next three years. They do, at least, produce lower emissions in general, but it's not something you'd want to continue for any longer than those three years. We really need to shift to zero-carbon vehicles as quickly as possible. We know that the world is facing climate catastrophe. We know that we have to reduce our carbon pollution by at least 75 per cent by 2030, otherwise the consequences are extremely dire. We think we've got problems with floods and fires at the moment—and that's after just over one degree of global warning—but we are headed for three degrees of global warming. We absolutely need to drastically reduce our carbon emissions as quickly as possible.

We need to shift to getting a zero-carbon fleet as soon as possible. We know that cars that are purchased today have a lifetime of 10, 15 or 20 years, so it is important to get all the support for 100 per cent completely renewable, zero-carbon vehicles as soon as possible and not to prolong the use of fossil fuel vehicles in any way for any longer than is necessary.

7:17 pm

Photo of Dean SmithDean Smith (WA, Liberal Party, Shadow Assistant Minister for Competition, Charities and Treasury) Share this | | Hansard source

The coalition will not be supporting the amendment proposed by Senator David Pocock and Senator Rice. Hybrids play an important role in bridging the gap between internal combustion engine vehicles and electric vehicles. They are more affordable, have a wider range and produce lower emissions than conventional internal combustion engine vehicles. Importantly, they are also very popular choices with consumers. There is substantial stakeholder support for retaining hybrids in the bill, in the event that it does pass.

7:18 pm

Ross Cadell (NSW, National Party) Share this | | Hansard source

Is this backdated to 1 July for transactions? I want to know if that is for order dates, invoice dates or registration dates?

Photo of Katy GallagherKaty Gallagher (ACT, Australian Labor Party, Minister for the Public Service) Share this | | Hansard source

I'm just getting some advice on that. But you're right; it is backdated to that date. I should flag here that we will be supporting the amendment that's before the chair, in relation to the phase out of plug-in hybrid vehicles. I've lost the bit of paper I was looking for, but we support the amendment. In answer to your question: they were first held and used on 1 July 2022.

7:19 pm

Photo of Matt O'SullivanMatt O'Sullivan (WA, Liberal Party) Share this | | Hansard source

Minister, can you detail for the Senate what the expected uptake of this initiative will be over the next three financial years in terms of the number of vehicles?

Photo of Katy GallagherKaty Gallagher (ACT, Australian Labor Party, Minister for the Public Service) Share this | | Hansard source

I'm going to be assisted by my advisers, at this time of the night and week. Senator Smith, were you on the committee that looked into this?

Photo of Dean SmithDean Smith (WA, Liberal Party, Shadow Assistant Minister for Competition, Charities and Treasury) Share this | | Hansard source

I didn't get answers then, and it doesn't look like I'll get the answer now.

Photo of Katy GallagherKaty Gallagher (ACT, Australian Labor Party, Minister for the Public Service) Share this | | Hansard source

I think you were advised or the information provided to that committee was that there wasn't an overall figure that could be provided but that reducing the cost of electric vehicles and the charges on them would increase the overall number of electric vehicles on the road. It is an incentive, essentially, to increase the number of electric vehicles.

7:21 pm

Photo of Matt O'SullivanMatt O'Sullivan (WA, Liberal Party) Share this | | Hansard source

I have a question on the amendment. Given that the top-selling vehicles are Toyota HiLux, Ford Ranger, Isuzu D-MAX—these are dual-cab utes—as well as, in the top four, the Toyota RAV4, has the government received any advice that there will be pure electric vehicles available, in that class of vehicle, in the following years that would be available for purchase? Has the government sought any advice from manufacturers as to whether those vehicles will be available? My understanding is that they do have some hybrids earmarked but they are still some years away. So what advice have you received as to whether or not there will be those vehicles available, given that that's what Australians are choosing to buy right now?

7:22 pm

Photo of Katy GallagherKaty Gallagher (ACT, Australian Labor Party, Minister for the Public Service) Share this | | Hansard source

The best answer I can provide you there is that the government will continue to talk with manufacturers. I think what you're seeing around the world is that where there are supportive arrangements in legislation or regulation manufacturers respond to that. We are seeing the effort, in terms of manufacture and output going into the design and delivery of electric vehicles over standard petrol vehicles. That's just the reality of what's happening. That's where the R&D is going. It's where the manufacturing effort is going.

Part of what we're doing with this legislation is sending the message that there is a government that's supportive of electric vehicles and the development of electric vehicles. The bit I'm responsible for in the APS is ensuring that we're purchasing electric vehicles so that we can start to generate the second-hand car market as well, which is really important.

7:23 pm

Photo of Matt O'SullivanMatt O'Sullivan (WA, Liberal Party) Share this | | Hansard source

In relation to the Commonwealth fleet, I'm wanting to understand what the government is intending to do, particularly in regard to the vehicles that parliamentarians will be driving.

Photo of Katy GallagherKaty Gallagher (ACT, Australian Labor Party, Minister for the Public Service) Share this | | Hansard source

I'll come back to you on whether there's anything I can provide about the vehicles you get for being a parliamentarian. Is that what you're talking about? I know there are MPs with electric vehicles, and there are MPs and senators with hybrids as well. You only have to look in the carpark, in the basement, to see that.

In terms of COMCAR, we would be wanting to move towards electric vehicles through that, and certainly through the APS, through our fleet, where we are able to, to replace these with electric vehicles. Obviously there will be some vehicles, including special-purpose vehicles and in Defence, for example, where that is not possible. So we'll take a sensible and responsible approach. But we want to generate an affordable second-hand car market as well. We're a big purchaser of vehicles, and it's responsible and shows a bit of leadership for the government in doing that.

7:24 pm

Photo of Dean SmithDean Smith (WA, Liberal Party, Shadow Assistant Minister for Competition, Charities and Treasury) Share this | | Hansard source

Could the minister reconfirm for the Senate the total cost of this measure over the forward estimates?

Photo of Katy GallagherKaty Gallagher (ACT, Australian Labor Party, Minister for the Public Service) Share this | | Hansard source

The FBT exemption as amended is expected to cost $195 million over the four years of the forward estimates.

Photo of Dean SmithDean Smith (WA, Liberal Party, Shadow Assistant Minister for Competition, Charities and Treasury) Share this | | Hansard source

And can I reconfirm that the government is not able to detail for the Senate the actual number of extra electric vehicles that will be on the road for each of the years over the forward estimates as a result of this $195 million initiative?

7:25 pm

Photo of Katy GallagherKaty Gallagher (ACT, Australian Labor Party, Minister for the Public Service) Share this | | Hansard source

I think it would be very, very different to predict, to be honest. But what we can say is we are putting these arrangements in place to incentivise the uptake and remove a disincentive to purchase electric cars over other more standard vehicles.

Photo of Dean SmithDean Smith (WA, Liberal Party, Shadow Assistant Minister for Competition, Charities and Treasury) Share this | | Hansard source

Has the government been able to model what the expected reduction in emissions will be as a result of this $195 million initiative?

Photo of Katy GallagherKaty Gallagher (ACT, Australian Labor Party, Minister for the Public Service) Share this | | Hansard source

We see it as a component of supporting progress to our 43 per cent emissions reduction target. We know that transport emissions are something that we have to reduce, and so having a National Electric Vehicle Strategy, incentivising the purchase of electric vehicles and making sure we're putting in the infrastructure to support those vehicles is a clear commitment we've made through our net zero and emissions reductions targets.

7:26 pm

Photo of David PocockDavid Pocock (ACT, Independent) Share this | | Hansard source

Recent research shows that, after price, the second major barrier to adoption of EVs is a lack of charging infrastructure and range anxiety. I understand that the government has committed to building more charging infrastructure. Could the minister detail that commitment and how this bill supports an increase in charging infrastructure.

7:27 pm

Photo of Katy GallagherKaty Gallagher (ACT, Australian Labor Party, Minister for the Public Service) Share this | | Hansard source

The bill itself doesn't do this, but since coming to government we have doubled the Commonwealth's investment in electric vehicle charging and refuelling infrastructure and fleets, and the new Driving the Nation Fund will provide $275.4 million over six years from 2022-23 to help meet some of these costs. The fund will support electric vehicle chargers across Australia. It will also support electric fleets and vehicle-to-grid technology. Initial investments under the fund will be $39.8 million over four years for a national EV charging network to be delivered by the NRMA, and $89.5 million over four years for a national expansion of hydrogen highways. The remainder of the fund will be delivered by ARENA, but initial investments are expected to target charging infrastructure for regional and remote areas and household managed charging.

7:28 pm

Photo of Dean SmithDean Smith (WA, Liberal Party, Shadow Assistant Minister for Competition, Charities and Treasury) Share this | | Hansard source

Does the government believe that supply chain issues are currently constraining the availability of electric vehicles in the Australian market?

Photo of Katy GallagherKaty Gallagher (ACT, Australian Labor Party, Minister for the Public Service) Share this | | Hansard source

I think supply chain issues are affecting the availability of a lot of things—including of cars in general—but, yes, they would be having an impact on electric vehicles. Anyone who's trying to purchase a new car at the moment or even a used car, with the price of used cars, would realise that the car industry is being significantly affected by supply chain issues.

Photo of Dean SmithDean Smith (WA, Liberal Party, Shadow Assistant Minister for Competition, Charities and Treasury) Share this | | Hansard source

Given that supply chain issues exist in the market, isn't this the wrong time to be increasing demand because that would put upward pressure on prices?

7:29 pm

Photo of Katy GallagherKaty Gallagher (ACT, Australian Labor Party, Minister for the Public Service) Share this | | Hansard source

No.

Photo of Janet RiceJanet Rice (Victoria, Australian Greens) Share this | | Hansard source

Minister, connected with this bill was, I understand, the commitment of the government to have procurement of Commonwealth vehicles to be 100 per cent electric except in exceptional circumstances.

Photo of Katy GallagherKaty Gallagher (ACT, Australian Labor Party, Minister for the Public Service) Share this | | Hansard source

Yes, that is the intention under the APS net zero strategy. Our fleet is an important part of that. It won't be for all of the vehicles. As I think we've made clear, there are some vehicles where that's not possible. But, yes, the government sees its role as being a leader in purchasing electric vehicles, not only to reduce our own emissions—transport emissions being something that we all want to reduce—but also, due to the turnover of our vehicles, because we are generating a second-hand electric vehicle market in this country.

Progress reported.

Senate adjourned at 19:30