Tax breaks on electric vehicles are being reduced

Car buyers considering purchasing an electric vehicle (EV) under a novated lease now have limited time left to take advantage of the current fringe benefits tax (FBT) discounts on EVs.

From 1 April 2027, the FBT exemption on some EVs is being reduced.

Currently, EVs purchased under a novated lease and valued up to the Luxury Car Tax (LCT) threshold (currently $91,387 for fuel efficient vehicles) are fully exempt from FBT.

From 1 April 2027, that full FBT exemption will only apply to EVs valued up to $75,000. For EVs valued from $75,000 up to the LCT threshold for fuel-efficient vehicles, only a 25 per cent FBT discount will apply.

Those arrangements will remain in place for two years up to 31 March 2029.

Then from 1 April 2029, the FBT discount applied to all electric vehicles under the LCT threshold will reduce to 25 per cent of the payable FBT rate.

The FBT discount only applies if an EV is purchased under a novated lease agreement and applies for the life of the agreement.

In addition to this, the FBT discount only applies to battery electric vehicles. Plug-in Hybrid Electric Vehicles (PHEV) were initially part of the FBT discount scheme but were removed from it in April 2025.