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The electric vehicle FBT exemption has made EVs more attractive for employees, business owners and employers using salary packaging or novated lease arrangements.
That full exemption is now expected to change from 2027.
Under announced proposed changes, the full FBT exemption for eligible electric vehicles will continue until 31 March 2027. After that, the rules are expected to narrow in stages.
If you are considering an EV, already have a novated lease, or manage vehicles through your business, now is the time to review the numbers before making a decision.
EV FBT Exemption
If you are considering an EV through salary packaging, a novated lease or your business fleet, the timing of your arrangement may affect the tax outcome.
Phase 1
Full exemption
Now – 31 March 2027
Phase 2
Two-tier rules
1 April 2027 – 31 March 2029
Phase 3
25% FBT discount
From 1 April 2029
The EV FBT exemption allows eligible zero or low emissions vehicles to be provided to employees without the usual fringe benefits tax applying.
This can be valuable where an EV is provided through:
To qualify under current rules, the vehicle generally needs to be an eligible battery electric vehicle or hydrogen fuel cell vehicle, and it must sit below the fuel-efficient luxury car tax threshold when first sold.
Plug-in hybrid electric vehicles are no longer treated as zero or low emissions vehicles for FBT purposes from 1 April 2025, unless transitional rules apply to an existing arrangement.
The announced proposal would wind back the full EV FBT exemption in stages.
The current rules continue.
For anyone considering an EV above $75,000, this is the main planning window.
From 1 April 2027, the proposed rules introduce a two-tier approach:
This means higher-priced EVs may still receive concessional treatment, but the benefit is expected to be reduced.
From 1 April 2029, the full exemption is expected to be replaced with a flat 25% FBT discount for all eligible EVs below the fuel-efficient LCT threshold.
| Timing | Vehicle Value | Expected FBT Treatment |
|---|---|---|
| Now – 31 March 2027 | Below fuel-efficient LCT threshold | Full FBT exemption |
| 1 April 2027 – 31 March 2029 | $75,000 or less | Full FBT exemption |
| 1 April 2027 – 31 March 2029 | Above $75,000 but below fuel-efficient LCT threshold | 25% FBT discount |
| From 1 April 2029 | Eligible EVs below fuel-efficient LCT threshold | 25% FBT discount |
The Government has indicated that existing lease arrangements will be protected.
This means current novated leases or salary packaging arrangements may continue to receive their existing FBT treatment for the relevant lease term, subject to final legislation and the terms of the arrangement.
RJS note: If you are considering an EV, do not rely on headline savings alone. The outcome depends on the vehicle price, lease timing, salary packaging structure, employee income and final legislation.
If you are considering an EV through a novated lease, the timing of your decision may matter.
Before 31 March 2027, eligible EVs below the fuel-efficient LCT threshold are expected to remain under the full exemption.
After that date, EVs above $75,000 may lose access to the full exemption and instead receive a smaller FBT discount.
If you are comparing vehicles, ask for modelling that shows the after-tax position under both current and future rules.
If your business provides vehicles to employees or is considering an EV fleet, this is a good time to review:
The proposed changes do not remove the benefit of EVs, but they may affect the timing and value of future arrangements.
Next Steps
Before entering a novated lease, salary packaging arrangement or fleet purchase, speak with your accountant to understand the tax impact and timing.
Speak With RJSThe proposed EV FBT changes may create planning opportunities before 31 March 2027, particularly for employees considering higher-value EVs and businesses planning fleet changes.
RJS can help review your position, model the tax impact and discuss whether an EV arrangement makes sense for your circumstances.
Speak with your RJS accountant before making a decision.
This article is published by R J Sanderson and Associates Pty Ltd ABN 71 060 299 783. This article contains general information only and is not intended to represent specific personal advice (Accounting, taxation, financial or credit). No individual personal circumstances have been taken into consideration for the preparation of this material. It is recommended that you obtain your own personal professional advice before making any financial or business decision.
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Accounting, taxation, business advisory and consulting services are offered through RJ Sanderson & Associates Pty Ltd ABN 71 060 299 783. Credit services are offered through a professional referral service with RJS Loan Solutions Pty Ltd ABN 25 123 033 116, Australian Credit Licence No. 393942. Wealth management, financial services, and insurance services are offered through a professional referral service with RJS Wealth Management Pty Ltd ABN 24 156 207 126, a corporate authorised representative (No. 438158) of Modoras Pty Ltd. Modoras Pty Ltd ABN 86 068 034 908, Australian Financial Services and Credit Licence No. 233209 is located at Level 3, 50-56 Sanders St, Upper Mt Gravatt Q 4122