For Australians considering an electric vehicle (EV), the window to maximise significant tax benefits under the current Fringe Benefits Tax (FBT) exemption is closing rapidly. If you intend to benefit from the full FBT exemption on a new EV, you must enter into an eligible commitment before April 1, 2027. After this date, the exemption will be significantly wound back, particularly for higher-value EVs, making the financial case for a novated lease less compelling for certain models.

This guide outlines the critical changes to the EV FBT exemption, provides current 2026 pricing for popular EV models, and helps you decide whether buying or leasing before the April 2027 deadline is the right move for your circumstances.

The EV FBT Exemption: What’s Changing in April 2027?

The federal government’s Electric Car Discount, introduced in July 2022, currently exempts eligible battery electric vehicles (BEVs) and hydrogen fuel cell electric vehicles (FCEVs) from FBT when provided through an employer, including via a novated lease. This exemption has delivered substantial savings, often tens of thousands of dollars, by allowing pre-tax salary to cover vehicle costs and running expenses like charging, registration, and insurance.

However, this generous policy is set for a significant overhaul. The Australian Treasury has released draft legislation proposing a phased transition from the full FBT exemption to a concessional FBT regime, commencing April 1, 2027.

The existing FBT exemption for eligible EV commitments will continue in full until the end of March 2027.

Here’s how the FBT treatment for new EV commitments will change:

  • Before April 1, 2027: Full FBT exemption applies to eligible BEVs and FCEVs with a base value below the Luxury Car Tax (LCT) threshold for fuel-efficient vehicles. For the 2026-27 financial year, this threshold is $91,661.
  • April 1, 2027 – March 31, 2029 (Transitional Period):
    • EVs with a base value of $75,000 or less: Will continue to receive a 100% FBT discount (effectively remaining FBT exempt).
    • EVs with a base value between $75,001 and the LCT threshold ($91,661 for 2026-27): Will receive a 25% FBT discount. This means 75% of the FBT would still be payable.
  • From April 1, 2029 onwards: All eligible EVs with a base value below the LCT threshold will receive a 25% FBT discount.

Crucially, existing eligible commitments made before April 1, 2027, will have their full FBT exemption preserved until the commitment ceases. This creates a significant incentive to act before the deadline if you are eyeing an EV priced above $75,000 but below the LCT threshold.

Buy vs. Lease: Navigating the Deadline

The FBT exemption primarily benefits those who can salary package an EV through a novated lease. For private buyers paying outright, the FBT exemption does not apply, though state-based incentives may still offer savings.

Novated Lease Before April 2027

Pros:

  • Maximised Tax Savings: For EVs currently priced between $75,001 and $91,661, a novated lease entered before April 1, 2027, locks in the full FBT exemption for the life of the lease. This allows all eligible running costs (finance, insurance, registration, servicing, charging, tyres) to be paid from your pre-tax salary, significantly reducing your taxable income.
  • Lower Running Costs: Bundling all vehicle expenses into one pre-tax payment simplifies budgeting and can lead to substantial annual savings, often in the range of $5,000 to $20,000+ over the lease term, depending on income and vehicle choice.
  • Convenience: Novated leases often include comprehensive insurance, servicing, and tyre replacement, reducing administrative burden.
  • Access to Newer Models: Leasing can make it easier to upgrade to a new EV every few years, benefiting from technological advancements and potentially better resale value at the end of the term.

Cons:

  • No Ownership: You don’t own the vehicle until the residual value (balloon payment) is paid at the end of the lease.
  • Mileage Limits: Leases typically have annual kilometre limits, incurring penalties if exceeded.
  • Early Termination Fees: Exiting a lease early can be costly.

Buying Outright (or financing traditionally)

Pros:

  • Full Ownership: You own the car from day one, with no mileage restrictions or end-of-lease considerations.
  • Equity Build-Up: You build equity in the asset over time.
  • Flexibility: You can sell the car at any time without lease termination complexities.

Cons:

  • No FBT Exemption: You miss out on the significant tax benefits of salary packaging.
  • Higher Upfront Costs: Requires a larger initial outlay or higher after-tax loan repayments.
  • Depreciation Risk: You bear the full risk of depreciation.

Recommendation

If your employer offers novated leasing and you are considering an EV priced between $75,001 and $91,661, acting before April 1, 2027, is highly recommended. This secures the full FBT exemption for your lease term, providing the maximum possible tax advantage. For EVs under $75,000, the urgency is less pronounced as the 100% FBT discount continues until March 2029, but locking in current terms can still be beneficial.

Many popular EVs fall within the current FBT exemption threshold ($91,661 for 2026-27), making them excellent candidates for novated leases.

Model (2026)Starting Price (RRP/before ORC)Driveaway Price (approx.)FBT Category (Post-April 2027 if new commitment)
BYD Atto 1 Essential$19,990 (drive-away)$19,990< $75,000 (100% discount)
BYD Atto 3 Evo Dynamic$41,990$45,919 (VIC)< $75,000 (100% discount)
MG MG4 Urban Essence$31,990 (drive-away)$31,990< $75,000 (100% discount)
Tesla Model 3 Premium RWD$54,900$60,345< $75,000 (100% discount)
Tesla Model Y Premium LR$68,900~$75,000 - $80,000< $75,000 (100% discount)
Kia EV6 Air RWD$72,660$79,372$75,001 - $91,661 (25% discount)
Tesla Model Y L (6-seat)$74,900~$80,000 - $85,000$75,001 - $91,661 (25% discount)
Tesla Model 3 Performance$80,900$87,437$75,001 - $91,661 (25% discount)

Note: Prices are approximate and exclude optional extras. Driveaway prices vary by state due to differing stamp duty and registration costs. Always confirm exact pricing with dealers and novated lease providers.

State-Specific EV Incentives (2026)

While the federal FBT exemption is the most significant incentive, several states still offer additional benefits. These often stack with the FBT exemption to further reduce overall costs.

  • New South Wales (NSW): Upfront rebates and stamp duty exemptions concluded in late 2023. Current incentives focus on EV fleet adoption (grants of $5,000–$50,000 until November 2026) and lower registration costs for EVs.
  • Victoria (VIC): No upfront rebates. Concessional stamp duty rates apply ($8.40 per $200 of market value). The $100 annual registration discount ended January 1, 2026. Victoria’s EV Road User Charge was abolished.
  • Queensland (QLD): Upfront rebates ($3,000-$6,000) concluded September 2, 2024. Ongoing incentives include a $200 annual registration discount and stamp duty concessions for eligible Zero Emission Vehicles (ZEVs).
  • South Australia (SA): The $3,000 subsidy closed December 31, 2024, and the 3-year registration exemption for vehicles registered between October 2021 and June 2025 has largely expired for new purchases. However, SA exempts new BEVs and FCEVs from stamp duty, potentially saving $1,000–$4,000.
  • Western Australia (WA): A $3,500 rebate for eligible vehicles up to $70,000 or until May 10, 2025, has likely concluded. Buyers will primarily rely on federal incentives.
  • Australian Capital Territory (ACT): Offers stamp duty exemption for new ZEVs and an emissions-based registration system that reduces fees for lower-emissions vehicles from July 1, 2024. Eligible homeowners can access interest-free loans from $2,000 to $15,000 for EVs and charging infrastructure.
  • Tasmania (TAS): No state-specific EV rebate. Federal FBT exemption applies. Aurora Energy offers discounted EV charging tariffs. Tourism businesses can apply for grants up to $2,500 per charger for destination charging.

For more detailed information on maximising your EV charging savings, refer to our guide: Slash Your EV Home Charging Costs by 70% in Australia 2026: A Smart Guide.

Understanding the ‘Cliff Edge’ at $75,000

The most significant implication of the April 2027 changes is the $75,000 base value threshold. An EV with a base value of $75,000 (before on-road costs) will continue to receive a 100% FBT discount until March 31, 2029, even if a new commitment is made after April 1, 2027. However, an EV priced at $75,001 or more (but still under the LCT threshold) will only receive a 25% FBT discount during this transitional period.

This small price difference can translate to tens of thousands of dollars in FBT savings over a typical 5-year lease term. For instance, some novated lease calculators demonstrate that a mere $1 difference in vehicle price across the $75,000 threshold after April 2027 could result in a $34,000 difference in savings over 5 years. Therefore, if you are considering an EV in the $75,000-$91,661 range, securing your novated lease before April 1, 2027, is paramount.

EV Charging Infrastructure in 2026

Australia’s EV charging network continues to expand, with significant investment in both public and private charging solutions. While major highways are increasingly covered by fast chargers, home charging remains the most cost-effective and convenient option for most EV owners. Consider installing a dedicated home EV charger; our guide on Best Home EV Chargers for Australian Homes 2026: Top 5 Ranked & $1,200+ Installation Guide can help you choose the right one.

Furthermore, the integration of EVs with home energy systems, such as Vehicle-to-Home (V2H) and Vehicle-to-Grid (V2G) technology, is a growing trend. This allows your EV battery to power your home or even export energy back to the grid, offering additional savings and resilience. Learn more in our guide: Unlock $2,000+ Annual Savings: Your 2026 Guide to Using Your EV as a Home Battery (V2H/V2G).

Bottom Line

For Australian consumers eyeing an electric vehicle, the current FBT exemption offers unparalleled financial benefits, particularly through novated leasing. The looming April 1, 2027, deadline for the full FBT exemption on EVs priced between $75,001 and $91,661 creates a clear incentive to act swiftly. If you can enter into an eligible novated lease agreement before this date for a vehicle in this price bracket, you will lock in substantial tax savings for the duration of your lease.

For EVs with a base value of $75,000 or less, the full FBT discount will continue for new commitments until April 2029, offering a longer decision window. However, with vehicle delivery times and market fluctuations, securing your EV sooner rather than later is generally advisable to take advantage of the most favourable tax treatment currently available. Engage with a reputable novated lease provider and a car dealer now to ensure your vehicle can be delivered and the lease commenced before the April 2027 deadline.