Tax office ruling provides big boost for electric vehicles in Australia

An Australian Tax Office ruling has provided a major boost to the economics of electric vehicles in Australia, just as enthusiasts prepare to queue up to register interest to buy the first mass-market electric vehicle to be offered in serious volume in this country.

The ATO ruling means that drivers of electric vehicles will be able to claim the same deductions for business use as they currently do for cars running on internal combustion engines.

That is despite the fact that electric vehicles require less servicing, less often, and their brakes wear less because of regeneration. And, of course, they don’t consumer liquid fossil fuels, although they do need to be charged (either by fossil fuels or via solar panels).

The ruling was actually included in an explanatory memorandum released last year. Previously, drivers of electric vehicles and hybrid cars did not have access to the cents per kilometer method as the rates were based on engine size.

The ATO ruled that separate rates based on the size of the engine are no longer available, so all motor vehicles will have a single rate of 66c/km – for valid business use.

EV’s, enthusiasts say, typically cost less than a third  of their ICE equivalents per kilometre, and as little as one fifth if charged either on off-peak rates or through household rooftop solar.

According to electric vehicle advocates, that means – on the basis of one third of the running costs – that the ruling may boost the economics of electric vehicles – such as the Tesla Model S, the BMWi, the Nissan Leaf, and the upcoming Tesla X and the mass-market Tesla 3 models – by as much as $2,200 a year.

(Vehicles can claim up to 66c/km for up to 5,000kms. If running costs are one third the cost of ICE, that translates to a benefit of $2,200).

In Australia, unlike the US where there are significant tax breaks and other incentives, as there are in numerous European countries, there is little government support for EVs, apart from reduced registration fees in some jurisdictions.

Australia has been slow to adopt electric vehicles, although wealthy types have been rushing to pick up the high-performance Tesla Model S, priced at $128,000 and beyond for additions and extended range.

But the market may change as early as next week. That’s when Tesla is opening up registrations for its new Model 3, its “mass-market” offering that will be priced at $US35,000.

Australians will be the first in the world to have the opportunity to register their interest to buy a vehicle (at the cost of a $1,500 deposit), with four stores in Melbourne, Sydney and Brisbane opening early to accommodate demand – a full 24 hours before the design and features of the vehicle are released.