Thousands of dollars will be slashed from the price of some electric vehicles in Australia after the Senate approved a tax cut following last-minute negotiations with crossbench senators.

The Electric Discount Car Bill is expected to pass into law on Friday after the Senate voted in favour of the proposal by 31 to 24 votes.

The new law is expected to cut fringe benefits tax for electric vehicles costing less than $84,916.

Under the new rules, employers could save up to $12,500 on the cost of an electric vehicle package for an employee, while individuals could save $4300 on the purchase of a $64,000 vehicle, according to Treasury estimates.

When approved by parliament, the tax cuts will be backdated to July 1 this year.

But the discounts were only passed after negotiations between the Labor government, the Greens and independent senator David Pocock over whether plug-in hybrid vehicles should qualify for the discount.

Plug-in hybrid vehicles feature both electric and internal combustion engines, and crossbench senators argued the bill should not subsidise petrol-based vehicles.

A deal on the law will see the tax cut on hybrid vehicles end in April 2025, and will see priority given to battery electric vehicles in commonwealth fleets.

Mr Pocock told the Senate the electric car tax cut was vital to speeding up Australia’s carbon cuts and addressing cost of living issues for motorists.

“Slow adoption of EVs is costing Australians money,” he said.

“It’s costing Australians money every time they go to the fuel pump, and it is causing damage to our climate. We have to look at the transition to EVs in the context of climate change. This is something that we have to rapidly speed up.”

Coalition senators opposed the new laws, however, with Liberal senator Matt O’Sullivan questioning whether electric vehicles were too heavy, whether they would strain the electricity network, and arguing they could not pull large loads across long distances.

“Some on the other side may say, ‘Well, only 10 per cent of Australians might hook up a caravan or a heavy load on the weekend’,” he said.

“My response to that is: if Labor wants to penalise those in that 10 per cent and add further pressures to their everyday cost of living for simply having the temerity to own a camper trailer, then they need to be up front with them.”

Despite opposition, Electric Vehicle Council chief executive Behyad Jafari called it a “landmark moment” for the transport industry in Australia that would not only encourage more businesses to buy electric fleets but would “turbocharge” the second-hand electric car market.

“This bill will allow thousands more Australians to get behind the wheel of an EV where they can access the benefits of lower fuel bills, cutting pollution, and an enjoyable driving experience,” he said.

– AAP