The Australian Government has opened a critical public consultation on proposed changes to the Electric Vehicle (EV) Fringe Benefits Tax (FBT) exemption, providing a limited window for stakeholders and the public to submit feedback before the deadline of September 28, 2026. These reforms, initially outlined in the 2026-27 Federal Budget, are designed to ensure the FBT concession remains targeted and fiscally sustainable, but will significantly alter the financial landscape for Australians considering an EV through a novated lease.
Currently, eligible zero-emission vehicles (Battery Electric Vehicles and Hydrogen Fuel Cell Vehicles) priced below the fuel-efficient Luxury Car Tax (LCT) threshold (currently AU$91,661 for 2026-27) are exempt from FBT when provided through a novated lease. This incentive has been a major driver of EV adoption, reportedly helping to put approximately 100,000 EVs on Australian roads since 2022.
The Proposed FBT Changes and Their Timeline
The Treasury’s consultation specifically addresses the transition of this concession to a permanent 25 per cent FBT discount. Key dates for the proposed changes are:
- From April 1, 2027: Eligible EVs valued over AU$75,000 will receive a 25 per cent FBT discount instead of the full exemption. EVs valued at AU$75,000 or less will retain the 100 per cent FBT exemption if the commitment to provide the vehicle is made before April 1, 2029.
- From April 1, 2029: All eligible EVs, regardless of value, will be subject to a permanent 25 per cent FBT discount.
Plug-in Hybrid Electric Vehicles (PHEVs) ceased to be eligible for this exemption for new leases from April 1, 2025, and remain ineligible.
“The government announced these changes in the 2026–27 Budget. A 25 per cent FBT discount will apply to: eligible EVs valued over $75,000 from 1 April 2027. all eligible EVs from 1 April 2029.”
Existing salary-packaged EVs under agreements signed before these cut-off dates will be ‘grandfathered’, meaning they will retain their current FBT treatment. This creates a clear incentive for potential buyers to lock in the full exemption on higher-priced EVs before the April 2027 deadline.
Impact on Australian EV Buyers
The FBT exemption has provided substantial savings, often amounting to thousands of dollars annually for eligible drivers. For instance, a novated lease on an EV priced at AU$70,000 could currently offer annual tax savings exceeding AU$10,000, depending on individual circumstances and income. The proposed changes will reduce these savings for vehicles above AU$75,000 from April 2027, and for all eligible EVs from April 2029.
Current FBT Exemption vs. Proposed Discount
| Vehicle Price (Excl. On-Roads) | Current FBT Treatment (pre-Apr 2027) | Proposed FBT Treatment (from Apr 2027, for >$75k EV) | Proposed FBT Treatment (from Apr 2029, all EVs) |
|---|---|---|---|
| Under AU$75,000 | 100% Exemption | 100% Exemption (until Apr 2029) | 25% Discount |
| AU$75,001 - AU$91,661 | 100% Exemption | 25% Discount | 25% Discount |
| Over AU$91,661 (LCT threshold) | Not Eligible | Not Eligible | Not Eligible |
Note: The Luxury Car Tax threshold for fuel-efficient vehicles is AU$91,661 for the 2026-27 financial year.
This shift means that while EVs like the Tesla Model Y, BYD Atto 3, and MG4 (which typically fall under the AU$75,000 threshold) will retain the full exemption for a longer period, more premium models will see reduced benefits sooner.
The Urgency for Feedback
With the consultation closing on September 28, 2026, individuals, businesses, and industry bodies have a limited time to provide input on the draft legislation and explanatory materials. The Treasury aims to ensure that support for EV uptake remains targeted and fiscally sustainable.
The timing of these changes coincides with a significant surge in Australia’s EV market. Battery electric vehicles accounted for nearly a quarter of all new car sales in August 2026, outselling petrol cars for the first time. Australia also recently passed the milestone of 500,000 BEVs on its roads.
While direct purchase rebates have largely concluded in most states, the federal FBT exemption has been a crucial financial incentive. For those considering an EV, understanding the current and upcoming FBT rules is paramount for maximising savings. Prospective buyers should explore how these changes could impact their financial decisions, especially if considering a novated lease for a vehicle over AU$75,000. For guidance on optimising charging costs, readers can refer to our guide on Slash Your EV Home Charging Costs by 70% in Australia 2026: A Smart Guide.
This period of consultation underscores the government’s ongoing recalibration of EV incentives as the market matures and adoption accelerates. The outcome of this consultation will shape the financial viability of EV ownership for many Australians in the coming years.
For more information on the consultation and to submit feedback, visit the Treasury’s Consult Hub website before September 28, 2026.