Everything you need to know about hybrid vehicle tax credits and incentives in Australia

If you want a good example of how government incentives for electric vehicles (EVs) can encourage consumer uptake, then look to the land of Vikings, fjords and men named Bjørn: Norway. 

Fuel-reliant internal-combustion-engined (ICE) vehicles are more expensive in Norway, with EVs incurring no purchase/import tax and an exemption from 25 per cent VAT. 

That’s not all: in regards to EVs, Norwegian counties and municipalities cannot charge more than 50 per cent of the price charged for fossil fuel cars on ferries, public parking and toll roads. 

The result? A sizeable 64 per cent of new cars sold in Norway in 2021 were pure electric, the highest rate in the world (Norway also has the largest fleet of Plug-in Hybrid Electric Vehicles, or PHEVs, per capita.) As of February 2022, there are more than 470,000 registered electric vehicles in the country. 

If you want a good example of poor EV uptake thanks to a near total lack of electric-vehicle incentives, then Australia, sadly, is a country at the other end of the spectrum. 

Due to a historic dearth of electric-vehicle incentives, EV sales made up a mere 2 per cent of the new car market locally in 2021, meaning that, for now at least, the Vikings have won.

A lack of meaningful government subsidies for electric cars and a lack of incentives for hybrid cars may drive sales down, but it also sadly drives prices up, with the higher cost of EVs in this country another deterrent for potential customers. 

Below you’ll find what the federal and state governments are now, finally, and perhaps still slowly, doing in regards to offering electric car incentives in Australia.

Federal Government 

This is the part where you can be slightly embarrassed about being Australian: the federal government has set no meaningful goals in terms of phasing out the sale of new ICE vehicles (most other major countries have, including the UK, which is banning ICE vehicles from sale from 2030, and banning hybrids from 2035). The ACT is the one territory in Australia to get on board, however, and it’s aiming for a ban from 2035, albeit a slightly isolated one (the ACT is surrounded by NSW, which, so far, is not following suit). 

However, this year the Australian government introduced an Electric Car Discount Bill that makes EVs below the luxury car tax threshold ($84,916) exempt from the fringe benefits tax and import tax. 

Fuel-efficient cars - defined as vehicles with a fuel consumption below seven litres per 100km as a combined rating - that are under $84,916 (don’t ask us why they didn’t just round it up to a clean $85k) won’t be taxed the LCT rate of 33c on every dollar, which gives them about $13k of leeway in comparison to ICE cars (only ICE cars under $71,849 dodge the LCT). 

Just another international comparison to put things in perspective: in the US, those who purchase an EV are eligible for a tax credit. How do electric car tax credits work, you may ask? Well, the Internal Revenue Service calculates how much EV owners get back, with $2,500 the minimum. The government adds money to the credit for each additional kWh worth of energy above 5kWh, up to a maximum of $7,500. 

A hybrid cars tax credit doesn’t exist, but PHEVs are eligible for the same tax credit that EVs are.

New South Wales 

The biggest benefit for those buying an EV in NSW is a sweet $3,000 rebate for the first 25,000 eligible EVs, plus an exemption from stamp duty.

It’s not all stellar news, however: as of 1 July 2027 - or once electric vehicles make up 30 per cent of new car sales, whichever comes first - the NSW state government will impose a tax of 2.5c per kilometre for EVs, and 2c per kilometre for hybrids. 

This special road tax aimed at stinging EV owners, or discouraging people from becoming EV buyers, is something of a world first. The rest of the planet is largely encouraging people to buy them, whereas we’ve decided to go our own, unique way.

Victoria 

Bad news for Victorian EV drivers: their state government has already imposed a 2.6c per kilometre road tax for EVs (it’s 2.1c per kilometre for PHEVs), a move that has been widely criticised. 

Having said that, it’s not all bad news. The Victorian state government is offering a $3,000 rebate for the first 6,400 eligible EVs purchased, a tidy $500 registration discount. 

There’s also something called the ZEV subsidy, which offers a $3,000 rebate on EVs priced under $68,740 (currently limited to 4,000 registrations, with 3,842 of those still available as of August 2022). 

Australian Capital Territory

The ACT government is far and away Australia’s most EV-friendly jurisdiction, offering zero per cent interest loans of up to $3,224 for upfront costs when buying an EV and zero to pay in regards to stamp duty for new EVs. 

New and used EVs also receive a sweet two years of free car rego (it’s a 20 per cent discount for PHEVs), equating to a saving of $1,166. 

South Australia

SA joins NSW and Victoria in offering a $3,000 rebate for new EVs (available for 7,000 new battery electric and hydrogen fuel cell vehicles valued below $68,750).

SA is also unfortunately joining NSW in its plan to charge a 2.5c per km road tax on EVs starting from July 2027, or once electric vehicles make up 30 per cent of new car sales. 

Tasmania

A two-year waiver on stamp duty has been introduced for new and second-hand EVs, which is expected to save EV drivers around $2000 in costs.

Queensland

A $3,000 subsidy for the first 15,000 EVs under $58,000, which limits buying options as there’s not a whole lot to choose from under that price. 

There’s also a $500 stamp duty discount and $364 registration discount for EVs. 

Mercifully, the EV road tax has been ruled out by the Queensland government. So far.

Northern Territory

A $965 rego discount (which equates to five years free registration) and $1,500 stamp duty discount for EVs costing up to $50,000 is all the NT is offering for the time being. 

The NT government will also purchase 200 EVs by 2030, which will count for 20 per cent of its government car fleet.

Western Australia

WA was the last to join the EV party, only announcing a $60 million EV package in May 2022. There’s a $3,500 rebate for up to 10,000 EVs priced under $70,000, which is currently the highest price threshold in the country. 

Because it can’t all be good news, there’s also going to be the same road tax that NSW and SA will be implementing.