Australian small business owners are buying “big, dumb cars” and spending $13 billion more on petrol because larger vehicles like SUVs, utes, vans attract overly generous tax breaks, according to a new report from the Australia Institute.
The report found over half of all cars sold in Australia are utes and SUVs, including top sellers including the Toyota HiLuxe ute, Mazda CX-5, the Mitsubishi Outlander, a figure that has doubled in a decade. But researchers say we don’t need them.
“Australians are often told that our collective preference for heavy, inefficient 4WD vehicles reflects our country’s vast distances and harsh outback terrain — a narrative that is reinforced relentlessly by the way these vehicles are marketed,” the report read.
“In reality, however, Australia is a highly urbanised country. The vast majority of vehicle use and fuel consumption occurs within our cities, and all of our major cities are connected by multi-lane highways.”
Researchers suggested hefty tax breaks were seeing small business owners, including tradespeople and sole traders, buy petrol-guzzling larger vehicles to cash in on the country’s temporary full expensing policy.
The policy sees business assets claimed as a one-off tax deducible expense at tax time and is typically capped at around $60,000 for cars. But there is no limit for cars capable of a one-tonne payload — meaning larger vehicles like utes, vans and 4WDs can be written off completely.
Another incentive luring car shoppers to larger vehicles is the loss carry-back tax offset — where if the purchase of a new car is a net loss for a business, it can be retroactively fitted to a prior year’s profits to reduce the tax paid. In other words, a reduced tax liability.
This is in addition to the instant asset write-off scheme and the fringe benefits tax — both of which offer a tax break for cars that can carry more than one tonne.
But the tax breaks are making Australia’s fleet a quarter less efficient than our UK counterparts, the report found, where vans are the top-selling commercial vehicle despite having a “greater share of its population in rural and regional areas”.
If we were to emulate the UK’s purchasing habits, Australian drivers would save some $13 billion on petrol and diesel at the pump, the report found — not to mention slash emissions by 17%.
Transport accounts for nearly a fifth (18%) of all emissions in Australia, a figure made larger by the Coalition’s reticence to introduce a fuel efficiency standard in Australia as in our fellow OECD countries like New Zealand and the UK.
Across the ditch, New Zealand’s recent introduction of the standard — which forces car makers to reduce their emissions, leading them to release more EV and hybrid models — has seen the EV market share soar from 4% of new vehicle sales to 20% in recent months.
Electric Vehicle Council chief executive Behyad Jafari said the neighbouring country’s enthused uptake of EVs proved fossil fuel car lobbyists wrong about any pitfalls associated with introducing the fuel standard.
“The Australian Government should have introduced fuel efficiency standards many years ago. If this had happened we would have tens of thousands more EVs on the road and Australian drivers would not be waiting months, or years, to take delivery of their new electric vehicles,” Jafari said.
“If we don’t speed up the process today it puts Australia’s ability to meet its emissions reduction targets from transport out of reach, passing the burden on to farmers and manufacturers.”
It comes as ACT independent senator David Pocock launched the Recharging Australia Report from Solar Citizens, an analysis that found strong fuel efficiency standards would save Australian households $11.2 billion over five years.
“Australians are currently getting dudded when it comes to the range and price of electric vehicles that are available to us,” Pocock said.
“And in large part that is because we don’t have fuel efficiency standards. We’re getting sent the world’s clunkers to Australia and we’re paying the price.”
Emma Elsworthy is Climate Editor at Crikey, SmartCompany, and The Mandarin, and writes daily morning newsletter the Worm. Before joining Crikey in 2021, Emma was a breaking news reporter in ABC’s Sydney newsroom, a journalist at BBC Australia, and a journalist in Fairfax Media’s regional network. She was part of a team awarded a Walkley for coverage of the 2019-2020 Black Summer bushfire crisis, and won the Australian Press Council prize in 2013.
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