Surging SUV ownership means Australians are needlessly spending an extra $13bn a year to fuel their cars, and the trend is sending transport emissions into overdrive at the same time similar nations are reducing them.
Analysis from the Australia Institute has found that the recent uptake in SUVs in Australia has led to the nation’s vehicle fleet now being 24% less efficient than the UK’s, a similarly developed right-hand-drive country.
SUVs accounted for more than 50% of new vehicles sold in Australia last year, a share that has almost doubled over the past decade.
Five of the top 10 bestselling vehicles in Australia in 2022 were twin-cab utes (which have two rows of seating, often at the expense of carrying capacity), while three were SUVs. Just two were small cars.
“Australians buy big, dumb cars and that means we spend a lot more on petrol than we should,” the report said.
In the UK, dual-cab utes did not feature in the top 10 vehicles for the same year. Two were light commercial vehicles and three were SUVs.
Despite the contrasting sales figures, the UK has a “greater share of its population in rural and regional areas” and has successfully managed to lower its transport emissions, the Australia Institute notes in its report.
Matt Saunders, an economist and co-author of the report, said the larger vehicles that have become popular in Australia recently don’t make sense for most people who buy them.
Tax rules have encouraged small business owners – not just tradespeople but also sole traders – into buying the larger vehicles and using them as both a work and personal vehicle, Saunders argued.
“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 said.
“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.”
Meanwhile, the top-selling light commercial vehicles in the UK are vans, which don’t try to straddle the line between work and personal use.
“In the UK, they rely on cars suited to their primary roles,” Saunders said. “They can’t double duty as a family car on the weekend, and they’re not considered a status symbol like SUVs and dual cabs are here.”
Tax perks and SUVs
Saunders points out two tax rules that he says are incentivising the uptake of “fuel-guzzling” SUVs and larger cars.
The temporary full expensing policy allows the purchase of new business assets, including motor vehicles, to be claimed as an immediate and full one-off tax deductible expense. This is capped at about $60,000 for passenger vehicles, but there is no limit to the deduction for vehicles that can carry a one-tonne payload.
The other incentive, the loss carry back tax offset, works together with the temporary full expensing policy, and means if the purchase of a new vehicle creates a net loss for a business then the loss can be applied to previous years’ profits to reduce the tax already paid on previous profits – resulting in a cash refund or reduced tax liability.
Additionally, the Grattan Institute has raised concerns that two other tax perks – the instant asset write-off scheme and fringe benefits tax – offer greater concessions for vehicles that can carry more than one tonne.
An outlier on road emissions
Transport accounts for 18% of Australia’s total emissions, the second-largest source after electricity at 34%. If Australians’ vehicle purchasing habits emulated the UK’s, national transport emissions could be reduced by 17% – even if emissions from trucks and buses remained unchanged. It would also save vehicle owners $13bn a year in petrol and diesel, and improve Australia’s fuel security, the report argues.
Globally, Australia is significantly behind efforts to reduce emissions from cars and light duty vehicles, especially in the OECD. Since 2000, Japan, the UK, France and Germany have reduced these emissions by 33%, 25%, 23% and 20% respectively, while Australia’s emissions from these vehicles has grown by 17%.
Even in the US and Canada, where SUVs have long been popular, car and light duty truck emissions have reduced by 8% and 2% respectively since 2000.
The Australia Institute warns that “the trend of Australians buying large, inefficient, high emission vehicles” will make it “virtually impossible” to achieve the Albanese government’s 43% emissions reduction target by 2030.
“Transport is an area where we can reduce emissions and at the same time save people billions of dollars a year,” report co-author Matt Grudnoff said, adding that this would be a “win for consumers and the environment.
To achieve this, the Australia Institute calls on the government to remove tax perks or reconfigure them to incentivise low-emitting vehicles, legislate mandatory emissions and fuel consumption standards for all new vehicles, and explore extending the safeguard mechanism to include transport emissions.
The report also calls on governments at all levels to commit to electric fleets by 2030, and to follow the ACT’s lead in charging registration fees based on emissions rather than vehicle weight.
