The two simply don't line up.
When a government incentive costs fifteen times its forecast, the instinct is to cut it — but cost alone rarely tells the whole story of a policy's worth. Australia's electric vehicle tax exemption, introduced in 2022 to make cleaner cars more accessible through novated leases, now carries a $1.35 billion annual price tag that has prompted a formal review. Yet the market it was meant to transform sits at barely ten percent electrification, far short of the fifty percent target set for 2035. The question being quietly asked in Canberra is not simply whether the program is too expensive, but whether the country is measuring the right things when it decides what a transition is worth.
- A tax break designed to cost a modest sum has ballooned to $1.35 billion a year — fifteen times its original forecast — forcing the federal government to reconsider whether the program can survive in its current form.
- Polestar Australia is sounding the alarm, warning that cutting the FBT exemption now would pull the ladder away just as the EV market begins its climb toward a government-mandated 50% target still a decade away.
- The company's own 38.5% sales surge in 2025 offers evidence that the exemption is working — but critics of the program's cost are unmoved by growth figures that still leave EVs at just one in ten new car sales.
- The sharpest tension in the debate is not EV spending at all — it is the billions quietly flowing to dual-cab ute tax breaks, subsidizing vehicles priced above $200,000 for buyers who are often not the tradespeople the policy was designed to help.
- Industry pressure may yet redirect the government's gaze from the EV program toward ute subsidies, reframing the entire conversation around where Australia's vehicle tax dollars are doing the least good.
Australia's electric vehicle tax exemption was meant to be a modest nudge toward cleaner cars. Instead, it has become a $1.35 billion annual line item — roughly fifteen times what officials originally forecast — and the federal government is now formally reviewing whether the program should be cut or reshaped.
Polestar Australia's Managing Director Scott Maynard is making the case for keeping it intact. His argument is essentially one of unfinished business: the government's own target calls for half of all new car sales to be electric by 2035, yet EVs currently account for just over ten percent of the light vehicle market. In his view, the program isn't overspent — it was simply underestimated from the start. Polestar's own 38.5% sales jump in 2025, driven in part by the FBT exemption making novated leases more attractive, lends weight to the claim that the policy is working, even if the destination remains distant.
But Maynard's deeper argument is about consistency. While the government scrutinizes EV incentives, it continues to funnel billions into Fringe Benefits Tax breaks for dual-cab utes — vehicles sometimes priced above $200,000 and purchased in numbers that now exceed the country's actual tradesperson workforce by a factor of one and a half. These same vehicles face lighter CO2 obligations under Australia's New Vehicle Efficiency Standard, at least for now.
For Maynard, the logic is plain: if the government wants to rationalize its vehicle tax spending, utes are the more defensible target. The EV program is still small, still building momentum, and still far from the goal it was created to reach. Abandoning it at this stage, he suggests, would be less like fiscal responsibility and more like giving up on a strategy the moment it starts to matter.
Australia's electric vehicle tax break has become unexpectedly expensive, and the federal government is now considering whether to cut or reshape the program. The cost tells the story: since July 2022, when the government exempted novated lease buyers of electric vehicles from Fringe Benefits Tax, the annual bill has ballooned to $1.35 billion—roughly fifteen times what officials originally budgeted. That gap has triggered a formal government review of the policy.
Polestar Australia, the Swedish electric car manufacturer, is pushing back hard against any cuts. Managing Director Scott Maynard argues that dismantling the tax break now would be strategically backwards. The government's own target is to have half the new car market buying electric vehicles by 2035. Right now, EVs account for just over 10 percent of light vehicle sales. By Maynard's logic, the program is delivering results that fall far short of the goal, so how can it be overspent? "The two simply don't line up," he said. His reading of the numbers suggests the real problem was poor forecasting from the start, not runaway success.
The evidence supporting his argument is visible in the market. Polestar's own sales jumped 38.5 percent year-on-year during 2025, a surge the company attributes partly to the FBT exemption making electric vehicles more affordable through novated leases. Both the Polestar 2 and Polestar 4 sit below the Luxury Car Tax threshold, meaning buyers can access the tax break. The exemption has clearly moved needle for the company and likely for the broader EV market.
But Maynard's real target is not the government's budget scrutiny—it's what he sees as a glaring inconsistency in how Australia subsidizes vehicles. While the government frets about the cost of encouraging electric cars, it pours billions into tax breaks for dual-cab utes. These are vehicles sold with FBT subsidies on prices exceeding $200,000, often to buyers who are not tradespeople. Australia is now selling one and a half times as many utes as it has tradespeople who would actually use them for work. "That would seem to me to be a much easier win than going after a corner of the market that's doing good things and not enough of them," Maynard said.
The ute question points to a deeper policy tension. Dual-cab utes also face less stringent CO2 targets under the government's New Vehicle Efficiency Standard, though those targets will tighten over time. Maynard's argument is straightforward: if the government wants to rationalize its vehicle-related tax spending, it should start with the utes, not the electric cars. The EV program is still small, still growing, and still far from its stated objective. Cutting it now would be like abandoning a strategy the moment it begins to work.
Citas Notables
This is not the time to change the settings on the FBT relief for electric vehicles. The government's published goal is to see 50 per cent of the market buying electric vehicles by 2035. They're nowhere near that.— Scott Maynard, Polestar Australia Managing Director
If the government is seeking to rationalise its expense through FBT subsidies, I feel strongly that it should be looking at the money it's investing in the sale of dual-cab utes before it looks at electric vehicles.— Scott Maynard, Polestar Australia Managing Director
La Conversación del Hearth Otra perspectiva de la historia
Why does Polestar care so much about this tax break? Aren't they just defending their own sales?
They are, but the argument goes deeper. The FBT exemption is what makes their cars competitive on a monthly lease payment. Without it, an EV costs more than a petrol car for the same monthly outlay. That's the whole mechanism.
But the government budgeted $90 million and it's costing $1.35 billion. That's a massive miss. Doesn't that justify a review?
It does justify a review. But Maynard's point is that the miss reflects bad forecasting, not program failure. EV sales are only at 10 percent of the market. If the program were actually working as intended, you'd expect costs to be even higher by now.
So he's saying the government should have known this would be popular?
Exactly. And he's also saying: if you're going to cut subsidies, why start with the one that's actually moving toward your climate goals? Why not cut the ute subsidies first?
Are ute subsidies really that large?
According to Maynard, Australia is selling one and a half times as many utes as it has tradespeople. Most of these sales are getting FBT subsidies on vehicles priced over $200,000. That's a lot of public money going to personal vehicles that look like work trucks.
What happens next?
The government is reviewing the EV tax break. If Polestar and other manufacturers can make the case that ute subsidies are the real budget problem, it might shift the conversation. But that's a political question now, not just an economic one.