The Albanese Government has announced significant changes to Australia’s Electric Car Discount (ECD), specifically the Fringe Benefits Tax (FBT) exemption for electric vehicles. Unveiled in a joint statement this week by Treasurer Jim Chalmers and Minister for Climate Change and Energy Chris Bowen on Monday, 4 May 2026, the updated policy extends the popular incentive but introduces a phased approach to eligibility, primarily focusing support on more affordable EV models.
The move aims to ensure the tax treatment for EVs remains financially sustainable while continuing to drive the nation’s transition to cleaner transport. The changes are projected to save the federal budget an estimated AUD$1.7 billion over the next five years from 2025-26.
Under the revised scheme, the full FBT exemption, which currently applies to eligible EVs below the Luxury Car Tax (LCT) threshold (currently AUD$91,387 for fuel-efficient vehicles), will continue unchanged until 31 March 2027.
“The electric car market has rapidly matured since we came to Government, and these changes will ensure our tax settings are still suitable.” – Treasurer Jim Chalmers and Minister Chris Bowen.
Phased Changes to EV FBT Exemption
The government’s review of the Electric Car Discount found the scheme successful in encouraging EV uptake, leading to approximately 64,000 additional battery-electric vehicle sales between 2022 and 2025. However, the unexpected popularity also led to rising costs, prompting the need for adjustment. The new framework will be implemented across three distinct phases:
Phase 1: Current Settings Maintained (Until 31 March 2027)
For the immediate future, the existing full FBT exemption will remain in place. This means eligible electric vehicles provided by employers to employees, including through novated leasing arrangements, will continue to be fully exempt from FBT, provided their value remains below the current LCT threshold of AUD$91,387.
Phase 2: Targeted Support for Affordable EVs (1 April 2027 – 1 April 2029)
From April 2027, the FBT exemption will become more targeted based on vehicle price. The full FBT discount will only apply to electric vehicles with a purchase price of up to AUD$75,000.
EVs priced between AUD$75,000 and the Luxury Car Tax threshold (currently AUD$91,387) will still receive a benefit, but it will be a reduced 25 per cent discount on their payable FBT. This change is intended to incentivise manufacturers to bring more affordable EV models to the Australian market, a trend already observed with around 10 EV models now available under AUD$40,000, compared to none a few years ago.
Phase 3: Permanent 25% FBT Discount (From 1 April 2029 Onwards)
In the final phase, commencing 1 April 2029, a permanent 25 per cent FBT discount will apply to all eligible electric vehicles priced below the Luxury Car Tax threshold. This will be the ongoing policy, with no specified end date for the incentive.
It is important to note that all existing novated lease arrangements will be honoured until the end of their lease period, ensuring current EV owners are not adversely impacted by these changes. Additionally, eligible EVs will continue to be exempt from import tariffs on an ongoing basis.
Impact on the Australian EV Market
Minister Bowen stated that the government expects EV uptake to remain strong despite these adjustments. The policy aims to recalibrate support, focusing on affordability and reflecting the growing maturity of the Australian EV market. This refined approach, coupled with the ongoing success of the New Vehicle Efficiency Standard, is expected to continue encouraging a broader range of competitively priced EVs into the country.
For businesses and individuals considering a novated lease for an EV, understanding these phased changes is crucial for financial planning. The immediate future offers the full FBT exemption, providing a strong incentive for those looking to transition to electric motoring. As the thresholds adjust, the focus will shift, potentially making models like the BYD Dolphin Essential (available under AUD$30,000) even more attractive.
Choosing an electric vehicle can significantly impact running costs, particularly given recent fuel price volatility. While charging at public stations is becoming more prevalent, most EV owners still primarily charge at home. Understanding your options for home charging, including optimising with solar and off-peak tariffs, remains key to maximising savings. For more information on reducing your charging expenses, refer to our guide: How to Slash Your Home EV Charging Costs in Australia 2026: Optimising with Solar, Off-Peak Tariffs & Smart Charging.
For those seeking the most cost-effective entry into EV ownership, the evolving market, influenced by these FBT changes, will continue to present new opportunities. Comparing models and their eligibility for incentives will be paramount. Our comprehensive guide on affordable options can assist in this decision: Cheapest Electric Cars Available in Australia in 2026.
Summary of FBT Changes for EVs Under Novated Lease
| Period | EV Price | FBT Exemption/Discount |
|---|---|---|
| Until 31 March 2027 | Below LCT Threshold (AUD$91,387) | Full FBT Exemption |
| 1 April 2027 – 1 April 2029 | Below AUD$75,000 | Full FBT Exemption |
| AUD$75,000 – LCT Threshold | 25% FBT Discount | |
| From 1 April 2029 | Below LCT Threshold (AUD$91,387) | 25% FBT Discount |
These adjustments signal a shift towards a more mature EV market in Australia, where government incentives are designed to complement increasing model availability and affordability, rather than solely stimulate initial uptake. The ongoing exemption from import tariffs further supports the competitive pricing of electric vehicles in the Australian market.