The Australian Government has confirmed how its electric vehicle incentive program will change over the next three years. The details matter significantly for anyone considering an EV through a novated lease or employer salary packaging arrangement.
At Carseekers, we think buyers who have been sitting on the fence about an EV purchase have a clear window to act. Here is exactly how the timeline works.
How the Current FBT Exemption Works
The Electric Car Discount (ECD) exempts employer-provided EVs from Fringe Benefits Tax. For most buyers using a novated lease arrangement, this is worth thousands of dollars per year in effective savings because FBT payments are deducted from pre-tax income.
To qualify, the EV must be priced below the Luxury Car Tax threshold for fuel-efficient vehicles, which currently sits at $91,387. The exemption applies to battery electric vehicles only. Plug-in hybrids were removed from the program on April 1, 2025 and PHEVs like the Mitsubishi Outlander PHEV are no longer eligible.
Existing leaseholders are grandfathered, meaning anyone already in a novated lease arrangement under the current rules is unaffected by the changes announced.
The Three-Stage Rollback Explained
Stage one runs until March 31, 2027. Full FBT exemption applies to all eligible EVs below the $91,387 LCT threshold. Nothing changes in the immediate term.
Stage two runs from April 1, 2027 to March 31, 2029. Full FBT exemption continues but only for EVs priced at $75,000 or less. EVs priced between $75,001 and $91,387 receive only a 25 percent discount on payable FBT rather than full exemption.
Stage three begins April 1, 2029. All EVs below the LCT threshold receive the 25 percent FBT discount only. Full exemption ends across all price points.
A separate change from July 1, 2027 creates a new zero-emissions vehicle LCT threshold of $120,000. More expensive EVs will become accessible without LCT, even as the FBT benefits narrow on the existing scheme.
What This Means in Dollar Terms
The difference between a full FBT exemption and a 25 percent discount is significant in practice. On an EV priced at $85,000, payable FBT on a standard vehicle is roughly $6,800 annually. A full exemption saves all of that. A 25 percent discount saves only $1,700.
For buyers considering an EV above $75,000 through a novated lease — models like the Kia EV6 GT, Zeekr 7X Performance, or various Ioniq 5 variants — ordering before April 2027 locks in full exemption under a new arrangement. Waiting beyond that date moves the vehicle into the partial discount bracket.
Why the Government Is Winding It Back
The ECD has cost significantly more than Treasury originally forecast. The government estimated the scheme would cost $55 million in lost FBT revenue in 2025-26. The actual figure is projected at $1.35 billion for that year, growing to $2.8 billion annually by 2028-29.
The program also worked. The government credits the ECD with driving 64,000 additional EV sales over its first three years, and the median price of EVs sold in Australia fell by 22 percent between 2021-22 and 2024-25. EVs went from 1.8 percent of the new-car market to 8.3 percent over the same period.
Sector groups disagree with the decision to wind back. The Electric Vehicle Council and the National Automotive Leasing and Salary Packaging Association both argue that removing incentives too early risks stalling adoption, particularly for outer-suburban buyers who only recently entered the market through salary packaging. The government's position is that the market has matured enough to sustain momentum without permanent full exemption.
PHEVs Are Still Not Eligible
The government confirmed it will not reinstate PHEV eligibility for the ECD. PHEV sales have continued growing without the incentive, which the government says demonstrates that PHEVs do not face the same non-cost barriers as battery EVs. Buyers looking at the Toyota RAV4 hybrid or Mitsubishi Outlander PHEV through salary packaging will continue to be ineligible for FBT exemption under the ECD.
The Buyer Takeaway: Act Before April 2027
If you are planning to acquire an EV through novated leasing and the car you want is priced above $75,000, the window for maximum benefit is open until March 31, 2027. That is approximately 11 months away from the time of publication.
For EVs priced under $75,000, the urgency is lower. Full exemption continues past 2027 until April 2029. The sub-$75,000 bracket covers most Chinese and Korean EVs, including the BYD Atto 5, base Kia EV6, and Tesla Model 3 entry variant.
For EVs between $75,001 and $91,387 — the Zeekr 7X Performance, Tesla Model Y Long Range, and various Ioniq 5 grades — the April 2027 deadline is when the calculation changes materially.
The most productive action right now is contacting your employer's salary packaging provider and getting a written comparison of the effective annual cost for your preferred EV before and after April 2027. Then time your order accordingly.
How to Calculate Your Actual Saving Before April 2027
The calculation your salary packaging provider should run for you compares total annual out-of-pocket cost under full FBT exemption versus partial 25 percent discount. The gap depends on your taxable income, the car's price, and whether the vehicle falls above or below the $75,000 threshold.
For a buyer on $120,000 taxable income using a $85,000 EV through novated leasing, the difference between full FBT exemption and a 25 percent discount on FBT is roughly $4,000 to $5,000 per year in effective after-tax cost. Across a three-year lease, that is $12,000 to $15,000 in accumulated difference.
That is a material sum and fully justifies the time needed to have the conversation with your salary packaging provider before the April 2027 deadline.
State-Level EV Incentives Are Separate
The federal FBT exemption changes do not affect state-level EV incentives, which vary by territory. Victoria, New South Wales, Queensland, and South Australia each have their own rebate and registration discount schemes. Some of these schemes have already closed or been wound back. Check your state government's current EV incentive page before assuming any state rebate is still available.
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The finer details
Your questions answered.
When does the EV FBT exemption change in Australia?
The full FBT exemption continues unchanged until March 31, 2027. From April 1, 2027, full exemption only applies to EVs priced at $75,000 or less. EVs between $75,001 and the LCT threshold receive a 25 percent discount on FBT instead. From April 1, 2029, all EVs receive only the 25 percent discount.
Does the EV FBT exemption still apply to PHEVs in Australia?
No. Plug-in hybrid vehicles were removed from the Electric Car Discount from April 1, 2025. Only battery electric vehicles remain eligible. The government confirmed in its statutory review that it will not reinstate PHEV eligibility, citing continued PHEV sales growth without the incentive.
What is the EV price threshold for FBT exemption in Australia?
Currently, EVs priced below the LCT fuel-efficient threshold of $91,387 qualify for full FBT exemption. From April 1, 2027, full exemption narrows to EVs priced at $75,000 or less. EVs between $75,001 and $91,387 will receive only a 25 percent FBT discount rather than full exemption.
Which EVs in Australia are affected by the 2027 FBT changes?
EVs priced above $75,000 but below $91,387 lose their full FBT exemption from April 2027. This includes the Zeekr 7X Performance, Tesla Model Y Long Range, several Ioniq 5 variants, and the Kia EV6 GT. EVs under $75,000, including the BYD Atto 5, Tesla Model 3, and most Chinese-brand options, retain full exemption until 2029.
Should I buy an EV now before the FBT changes?
If your preferred EV is priced above $75,000 and you are planning a novated lease, ordering before April 2027 locks in the full FBT exemption. Waiting beyond that date puts the vehicle into the partial discount bracket, reducing your annual saving significantly. Get a written cost comparison from your salary packaging provider first.
Are existing EV novated leases affected by the 2027 changes?
No. The government has confirmed existing lease arrangements are grandfathered, meaning current leaseholders are unaffected by the new rules. Only new arrangements entered into after the relevant cutoff dates will be subject to the changed FBT treatment.
