FBT Changes For Electric Vehicles Explained:
On the 5th of May 2026, the Federal government announced changes to the fringe benefits tax (FBT) exemption for electric vehicles (EVs).
These changes were inevitable, and the policy was not designed to last forever. There was always going to be a review scheduled for three years after the start of the legislation.
The review into the FBT exemption for electric vehicles was delayed until after the election, and the Federal Government has acted on the review by announcing a suite of important changes.
There has been quite a bit of negative press and moaning regarding the changes; what we did get was some positive certainty with regard to the FBT policy. Certainty is always a good thing when it comes to taxes and finances. We all make impulsive day-to-day financial decisions; we all know buying that $15-20 lunch twice a week is not great for our savings plan, but sometimes that snooze button on the alarm just feels more inviting in the morning. Despite these moments of financial recklessness, we also like to plan for our long-term financial security as well. This is why these new FBT changes and the certainty they provide could potentially provide people with tax savings well into the 2030s.
The first phase of the electric vehicle discount involves the benefit continuing in its current form until the 31st of March 2027. This gives people plenty of time to get into their EV and save on taxes.
The second phase, which will last from 1st April 2027 to 1st April 2029, sees the full FBT discount apply for electric vehicles costing less than $75,000. This isn’t the impediment as some people think. There are plenty of vehicles priced under this point now, and there will be more makes and models over the next few years that will sit under $75,000. Also, it is important to remember that any decent novated lease consultant should have access to several fleet discounts, and the ethical ones should be passing on the full discount to the customer. Manufacturers and dealers will be tempted over the next few years to get their cars just below that $75,000 mark to ensure more sales.
During the second phase, EVs costing over $75,000 but under the luxury car tax threshold will receive a 25% discount on their payable FBT. This is nothing to sneeze at and is still a significant discount and tax saving. So don’t rule out an EV within this price bracket! Any EVs above the luxury car tax threshold will be subjected to FBT at the normal rate for petrol vehicles.
The third phase, which will run from after 1st April 2029, sees all EVs under the luxury car tax threshold get a 25% discount on their payable FBT. As mentioned earlier, this is still a solid tax discount, and the numbers should stack up for most people.
One important point to remember with these cut-off dates is that the settlement must take place before the said date for the vehicle to qualify – if you take delivery after the target date, there is a strong chance it won’t count for the FBT exemption you are going for. Planning with your novated consultant is essential to ensure you don’t get caught out.
All of these cut-off dates open a range of possibilities. For example, taking a 30-month novated lease and then novating a new vehicle for 60 months will see you driving a fully FBT-exempt vehicle into 2034! Just be aware that not all novated lease companies offer such flexible terms; most will only do set lengths of time, so it is important to find a company that gives you that flexibility.
