Australia urged not to pull the plug on hybrid tax cuts

Australia could remove a vital "stepping stone" in its transition to electric vehicles if tax breaks for some hybrid cars end next year, automotive groups say.

The warning comes amid a sales rush for plug-in hybrid electric cars, according to vehicle leasing company Smartgroup, and a survey showing three-in-five buyers nominated tax cuts as the top reason they purchased the low-emission vehicles.

But the Australian Tax Office has issued additional guidance to potential buyers confirming the deadline, and the independent senator who helped create the concessions says taxpayers should not keep subsiding "fossil fuel vehicles".

Sales of new plug-in hybrid vehicles have more than doubled in Australia over the past year.

Smartgroup group executive Sid Jha said the vehicles now represented more than one in every 10 cars leased.

He said fringe benefits tax cuts on plug-in hybrids were fuelling the trend and consumers were rushing to sign commitments before they expired.

"There is a sense of urgency that we see because people are realising that the exemption is running out in April and they're trying to get a vehicle," Mr Jha said.

"People are not buying (electric vehicles), so they are looking at the next-best option, which is a hybrid model or a (plug-in hybrid)."

The tax exemption, which came into effect in late 2022, removed fringe benefits tax from some low and zero-emission vehicles purchased through novated leases.

The concession for plug-in hybrid cars is due to end in April, but will continue for battery electric vehicles.

A survey of more than 600 plug-in hybrid vehicle drivers, conducted by JWS Research for the National Automotive Leading and Salary Packing Association, found three in five named the tax cut as the leading reason they chose hybrid technology.

Almost two in three surveyed would also consider buying a plug-in hybrid for their next vehicle, and more than half said they would consider an electric car.

Association chief executive Rohan Martin said the results proved plug-in hybrid cars were acting as a "stepping stone" towards electric transport.

"What this data shows is that without the (tax) exemption, a whole lot of satisfied plug-in hybrid drivers would most likely still be driving less efficient, higher tailpipe emission cars," he said.

"The FBT exemption makes it affordable and accessible for Australians to try a PHEV."

Automotive firms including Mitsubishi and the Motor Trades Association also called for the tax cut to be extended for hybrid vehicles at recent Transition to Electric Vehicles inquiry hearings.

But independent senator David Pocock, who with the Greens negotiated to limit the hybrid vehicle tax break, told the ABC he did not support an extension.

"In a cost-of-living crisis where people are doing it tough and a climate emergency, taxpayers shouldn't be subsidising fossil fuel vehicles," he said.

"This is about genuinely transitioning away from fossil fuels."