By Jennifer Dudley-Nicholson in Brisbane

Extending a tax cut for electric cars until 2035 could put another 1.5 million motorists behind the wheel of a low-emissions vehicle and significantly cut transport pollution, a study has found.

The government could also fuel the supply of second-hand low-emission cars by bringing plug-in hybrid electric vehicles back into the scheme.

The Electric Vehicle Council released the findings on Monday in financial modelling exploring the impact of the fringe-benefits tax exemption for electric cars.

The modelling comes after the Productivity Commission called on the federal government to scrap the tax break, calling it a duplicative and expensive policy.

It also follows national debate over the introduction of a road-user tax to be levied on electric vehicle drivers, and after several states, including NSW, Victoria and Queensland, removed rebates for their purchase.

The research, prepared by Magenta Advisory, investigated the fringe-benefits tax exemption introduced in July 2022 that cut the price of electric cars purchased through novated leases.

It found the tax cut could help to put an additional 1.5 million electric cars on Australian roads if extended until 2035, and had already aided in the purchase of 105,000 more EVs between 2022 and 2024.

An additional 200,000 plug-in hybrid vehicles could hit the roads in Australia by 2035 if they were allowed back into the scheme, the modelling found, and could contribute to a growing second-hand market by adding 870,000 low-emission cars.

Allowing the scheme to run until 2035 would also cut transport emissions by 50 per cent more than if the tax exemption was removed in 2027 when it is due to be reviewed, the report said.

Failing to take action to cut transport emissions in this way could see Australia miss its 2050 net-zero target, Electric Vehicle Council chief executive Julie Delvecchio said.

“With transport on track to be Australia’s largest emitting sector, incentives like the EV discount are critical to hitting our climate goals,” she said.

“Keeping this support until 2035 and bringing back plug-in hybrids into the scheme could deliver hundreds of thousands more new and second-hand EVs, making them affordable for more households.”

Electric car purchases under the scheme had been most popular in Melbourne, Sydney and Brisbane suburbs between 30km and 44km outside city centres, the analysis found, and to drivers on incomes between $90,000 and $120,000.

The findings showed the tax cut was making electric cars accessible to a wider group of people, National Automotive Leasing and Salary Packaging Association chief executive Rohan Martin said, including workers who would not have otherwise been able to switch from a petrol or diesel car.

“The electric car discount is popular with families on middle incomes who live in the outer suburbs,” he said.

The findings come despite a proposal from a Productivity Commission report to scrap the tax break, which it said had cost taxpayers between $1000 and $20,000 per tonne of carbon emissions abated.

The federal tax cut and state-based registration discounts should be replaced, the commission said, by greater support for car-charging infrastructure.

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