Calls for more EV subsidies as electricity grid strains under load
The Fringe Benefits Tax (FBT) exemption for electric vehicles (EVs) is proving to be both very costly to the federal budget and highly inequitable.
Taxpayers spent $1.35 billion on the subsidy in 2025-26, and the Treasury estimates that the entire cost of the FBT exemption for battery EVs will be $9.7 billion between 2026-27 and 2029-30 and potentially $20 billion over the next decade. If fuel shocks persist and EV adoption increases, costs will rise.
Battery EVs’ running costs are further reduced because they are free from road user charges levied under the 52.6 cents-per-litre fuel excise, which rises twice a year as part of the biannual CPI indexation.
Excise and customs duties on petrol, diesel, and other fuel products generated approximately $27 billion in revenue for the federal government in the most recent year.
Therefore, as drivers migrate from traditional combustion vehicles to battery EVs and hybrids, fuel excise revenue will fall.
In short, subsidising battery EVs places a substantial strain on the federal budget at a time when it is already in deficit.
The Victorian Legislative Council Economy and Infrastructure Committee tabled its report on electric vehicle infrastructure on Tuesday, making 40 recommendations to accelerate EV uptake while maintaining a reliable electricity system.
The report called for the Victorian government to strengthen buyer incentives, including purchase subsidies, stamp duty relief, and registration discounts, and to advocate for similar support from the federal government.
The inquiry also found that adequate infrastructure must be rolled out to handle the transition away from internal combustion engine vehicles, especially in regional areas where regular blackouts would be life-changing.
Indeed, Australian households are also being called upon to subsidise the installation and operation of EV chargers.
Meanwhile, the Monash Energy Institute told the inquiry that if more EV drivers plugged their vehicles in during the 5 pm to 9 pm evening peak, Victoria’s grid capacity requirement could double.
To meet that demand, massive capital investment in distribution network infrastructure would be required, with those costs ultimately borne by electricity consumers across the board, including families who drive petrol cars and cannot afford an EV, the Monash Energy Institute said.
Stop wasting taxpayer money on EV subsidies:
Why are Australia’s governments wasting taxpayer money on private vehicle subsidies?
The vast majority of these subsidies go to wealthier inner-city residents, worsening inequality. They also cost the federal and state governments billions of dollars in lost tax revenue as they struggle with rising debt levels.
Finally, with petrol and diesel costs higher due to the war in the Middle East, Australians are financially incentivised to buy EVs even without government subsidies.
Let EV users pay the true costs of their vehicle purchases and charging.
Scarce taxpayer money should go where it is most needed and where it will benefit the most Australians.
