The federal government has recently announced a significant shift in the landscape for electric vehicle (EV) incentives. While the popular Fringe Benefits Tax (FBT) exemption has played a major role in driving the surge of EVs onto Australian roads, new changes are set to wind back these discounts in a phased approach starting next year.
The decision comes as the cost of the “Electric Car Discount” scheme far exceeded initial expectations—ballooning from a forecast $90 million to an estimated $1.4 billion. Here is a breakdown of what the new three-phase plan means for current and future EV owners.
The Three-Phase Rollout
The government’s plan transitions the full FBT exemption into a more targeted, and eventually reduced, incentive:
Phase 1 (Now until 31 March 2027)
For now, the status quo remains. If you are looking at a novated lease for a battery electric vehicle (BEV) that costs less than the fuel-efficient Luxury Car Tax threshold (currently $91,387), you can still access the full FBT exemption.
Phase 2 (From 1 April 2027)
The eligibility criteria will tighten. A new $75,000 threshold will be introduced. Only EVs priced below this amount will remain eligible for the full FBT exemption. Vehicles priced between $75,000 and the Luxury Car Tax threshold will no longer be exempt but will instead receive a 25% FBT discount.
Phase 3 (From 1 April 2029)
The full exemption will be removed entirely for all new leases. From this date, all eligible EVs (below the LCT threshold) will only receive a permanent 25% FBT discount.
Why the Shift?
Treasurer Jim Chalmers and Energy Minister Chris Bowen have indicated that the changes are designed to balance the budget while still encouraging a shift toward more affordable EV models. By lowering the threshold to $75,000, the government aims to incentivize manufacturers to bring lower-cost electric cars to the Australian market, rather than subsidizing luxury models that many buyers might have purchased regardless.
What Does This Mean for You?
If you already have an EV on a novated lease, or you enter into one before the new phases begin, there is some good news: grandfathering rules apply. Existing lease agreements will be protected, allowing current participants to retain their original tax benefits for the duration of their lease term.
However, for those considering a higher-end EV, the financial equation is about to change. Experts suggest that vehicles costing over $75,000 could see their annual lease costs rise by thousands of dollars once the Phase 2 changes kick in.
The Bottom Line
The window for maximizing the “full” benefits of the EV FBT exemption is narrowing. While EVs will still remain more tax-effective than petrol vehicles thanks to the ongoing 25% discount, the most significant savings are now on a countdown. If you’ve been eyeing a premium EV, now might be the time to lock in a lease before the 2027 deadline.
To read more about these changes, visit the following sources:
EV Journey 
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