It's not uncommon for the government to give with one hand but to take away with the other, and this week Inland Revenue Department released its interpretation on how the clean car discount scheme would interact with the tax legislation

For tax purposes the clean car rebate would reduce the cost of the vehicle thereby reducing your depreciation.

If however you purchase what is regarded as a high emitting vehicle and have to pay an additional fee this would increase the cost of the vehicle meaning if the vehicle is provided for private use and fringe benefit tax is payable the cost base is increased meaning a greater FBT amount is due.

If you are GST registered the clean car discount would need to be returned for GST purposes.

The net result of the above would be if a $8,625 rebate was provided to a business on the purchase and EV they would have to account to IRD for $1,125 of GST and then reduce the vehicle value for depreciation purposes by $7500 the net effect of both of these over the life of the vehicle is that the taxpayer will pay back or lose the tax benefit of equivalent to $3,225 (assuming a 28% tax rate) out of the $8,625 rebate, bringing the after-tax rebate down to $5,400.

While none of this is surprising it does change the economics, to a degree, for the purchase of the EV.