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What happens to the EV FBT exemption after March 2027?

Last checked: 19 October 2026 · 5 min read · By The EV Insider

Short answer: nothing changes before 31 March 2027. Until then, eligible electric cars stay fully exempt from fringe benefits tax (FBT). In the 5 May 2026 Budget, the Government announced a phased change from 1 April 2027:

The Government says existing leases won't be affected. As at 19 October 2026 these changes are not yet law.

General information only, not tax advice. Legislation can change before it passes.

General information, not tax advice. Rules change and your circumstances differ. Check the ATO sources linked here and speak to a registered tax agent or your employer's payroll team before you decide.

Where things stand (checked 19 October 2026)

The three phases, as announced

Period EV costing A$75,000 or less EV above A$75,000, below the LCT threshold
Until 31 March 2027 Fully exempt (current rules) Fully exempt (current rules)
1 April 2027 to 31 March 2029 100% discount (0% statutory rate) 25% discount (15% statutory rate)
From 1 April 2029 25% discount 25% discount

The ATO says the 100% discount would work through a 0% rate in the FBT statutory formula, and the 25% discount through a 15% rate. The normal rate is 20%, so 15% is a quarter less. Treasury's consultation page frames it the same way: EVs at A$75,000 or less keep the full exemption where the commitment to provide the car is made before 1 April 2029.

Cars that attract luxury car tax still won't qualify. For 2026–27 the threshold for fuel-efficient vehicles is A$91,661.

What a 25% discount means in dollars (example only)

These are illustrative numbers, not a quote. Say an EV has a base value of A$80,000. That's above A$75,000, and the lease starts after 1 April 2027.

Example car, base value A$80,000 Taxable value a year FBT if nothing is done to reduce it
Today, if eligible A$0 (exempt) A$0
Proposed 15% rate from 1 April 2027 A$12,000 About A$11,732
Normal 20% rate (petrol car, for comparison) A$16,000 About A$15,643

FBT worked out with the 47% FBT rate and the 2.0802 Type 1 gross-up rate (ATO). Assumes a full year of private use.

In practice, most novated leases would cancel the FBT out by having you pay some costs from after-tax pay, using the employee contribution method. In this example that means about A$12,000 a year from post-tax salary. GST is often payable on those contributions too. Under today's exemption the figure is zero. The car is still cheaper than a petrol one under the same rules, but the gap to a sub-A$75,000 EV is large.

How the A$75,000 test is expected to work

Treasury's exposure draft, as reported by Accounting Times, uses the car's base value at the time the employer first holds it. The ATO's current definition of base value includes GST, dealer delivery and any non-business accessories fitted. It excludes registration and stamp duty.

So a drive-away price isn't the same as base value. A car advertised just over A$75,000 drive-away could sit under the line once rego and stamp duty are removed, and accessories could push another car over it. This is our reading of how the existing definition would apply, not settled law. Ask your provider to confirm the base value in writing.

What counts as an "existing lease"?

The Government says existing leases won't be affected. The exposure draft reportedly protects cars provided under a commitment made before 1 April 2027 until that commitment ends.

The Institute of Public Accountants' submission on the draft says the explanatory materials list events that may create a new commitment. These include refinancing, changing the lease term or residual, fitting accessories that change the lease payments, and changing employer. The IPA reads the draft as keeping the exemption until the end of the FBT year in which a new commitment is made. The new rules would then apply from the next FBT year. This is a secondary reading of a draft, and the final law may differ. If you have a lease, ask your provider before changing anything after 31 March 2027.

Who is most affected

What to do now

  1. If you're shopping, ask for the car's base value as well as the drive-away price.
  2. Ask your provider in writing when your commitment is treated as made: at signing, at order or at delivery. Ask what happens if delivery slips past 1 April 2027.
  3. If you already have a lease, ask whether any change you're planning would count as a new commitment.
  4. Check whether a cheaper model keeps you under A$75,000. See our guide to whether a novated lease is worth it.
  5. Review what can go in a novated lease and our novated lease and FBT guide.

FAQ

Will my current EV novated lease be affected?

The Government and the ATO both say existing leases won't be affected. Changes to your lease after 31 March 2027 might count as a new commitment under the draft, so check before you vary it.

Is this law yet?

No. As at 19 October 2026 it's an announced measure with draft legislation. We couldn't find a bill introduced to Parliament.

Can I sign before April 2027 and take delivery after?

That depends on how "commitment" is defined in the final law. We can't confirm the answer, so get your provider's position in writing.

Do plug-in hybrids get the discount?

Plug-in hybrids have generally not been eligible since 1 April 2025, apart from limited existing arrangements.

Does the home charging rate change?

The ATO's 5.47 cents per km home charging rate applies for FBT years from 1 April 2026 and isn't part of this measure. See our charging costs page.

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Sources

Last checked: 19 October 2026. General information only, not tax, financial, legal or credit advice. We don’t recommend any provider; where businesses are named, it’s for information. See our affiliate disclosure.