Is the EV FBT exemption ending in Australia?

Not immediately, but it is being wound back in stages. As announced in May 2026, the full exemption continues for all eligible EVs below the luxury car tax threshold until 31 March 2027. From 1 April 2027 the full exemption applies only to eligible EVs valued at or below $75,000, while dearer eligible EVs get a 25 percent FBT discount instead. From 1 April 2029 the full exemption ends and all eligible EVs below the threshold get the 25 percent discount only. Existing leases were stated to be unaffected. Because this is announced policy, confirm the final detail with the ATO and a tax adviser. Sources: PwC tax alert (https://www.pwc.com.au/) and the minister's joint media release (https://minister.dcceew.gov.au/), as of 2026-06-02.

Which EVs qualify for the FBT exemption?

A car qualifies if it is a battery electric vehicle or a hydrogen fuel-cell vehicle, it was first held and used on or after 1 July 2022, and its value is at or below the luxury car tax threshold for fuel-efficient vehicles, which is $91,387 for the 2025 to 2026 financial year. An EV priced above that threshold does not get the exemption. Plug-in hybrids generally no longer qualify for new arrangements from 1 April 2025. Sources: ATO, "Electric cars exemption" and "Luxury car tax rate and thresholds" (https://www.ato.gov.au/), as of 2026-06-02.

Do plug-in hybrids still get the FBT exemption?

Not for new arrangements. From 1 April 2025 a plug-in hybrid is no longer treated as a zero or low-emission vehicle for FBT, so a PHEV novated lease entered into on or after that date does not get the exemption. A PHEV can keep it only under a narrow transitional rule: its use had to be exempt before 1 April 2025 and there must be a financially binding commitment, in place before that date, to keep providing the car, left unchanged. Source: ATO, "FBT on plug-in hybrid electric vehicles" (https://www.ato.gov.au/), and Grant Thornton (https://www.grantthornton.com.au/), as of 2026-06-02.

Do EVs pay a road-user charge in Australia?

Not a per-kilometre charge at the moment. Victoria's distance-based EV charge was ruled invalid by the High Court in Vanderstock v Victoria in October 2023, on the basis that only the Commonwealth can levy that kind of charge. A federal road-user charge has been discussed but is not in force as a per-kilometre charge as of 2026-06-02, so the EV running-cost advantage is not currently offset by a distance tax. Source: High Court of Australia, Vanderstock v Victoria [2023] HCA 30, as of 2026-06-02.

The EV FBT Exemption in Australia, and How It Is Changing

For a lot of Australians, the single biggest saving on an electric vehicle (battery electric vehicle, or BEV) does not come from the sticker price at all. It comes from the fringe benefits tax (FBT) exemption on an eligible EV bought through a novated lease with your employer. That exemption is what makes a salary-packaged EV so much cheaper than financing the same car with after-tax dollars. In May 2026 the federal government announced that the exemption will be wound back in stages rather than continue indefinitely, which changes the timing maths for anyone thinking about it. This guide explains, in plain terms, what the exemption is, the phased changes that were announced, the price cap that has always applied, and what happened to the state rebates. Because this is tax policy that affects a major purchase, every figure and date below is sourced and dated, and you should confirm the current rules with the Australian Taxation Office (ATO) and a licensed novated-lease or tax adviser before you commit.

By mht-dev, Frontend Engineer & Creator

A frontend engineer who bought a first electric car in March 2026 and built EV Charge Calculator while working out the real cost of charging it, writing every guide from an everyday new EV owner's perspective.

What the FBT exemption actually is

Fringe benefits tax is a tax an employer pays on certain non-cash benefits given to employees, and a car provided through a novated lease is normally one of those benefits. The Electric Car Discount made eligible zero-emission and low-emission cars exempt from FBT, so when your employer provides an eligible EV under a novated lease, no FBT is charged on the car benefit. In practice that lets you pay for the car, and often its running costs, out of your pre-tax salary, which is where the large saving comes from compared with buying the same car with after-tax money. Source: ATO, "Electric cars exemption" (https://www.ato.gov.au/), as of 2026-06-02.

To qualify, the car has to be a battery electric vehicle or a hydrogen fuel-cell vehicle, it has to be first held and used on or after 1 July 2022, and its value has to be at or below the luxury car tax (LCT) threshold for fuel-efficient vehicles. The exemption is tied to the car benefit, not to the person, so it is the employer-provided novated-lease arrangement that carries the exemption. Source: ATO, "Electric cars exemption" (https://www.ato.gov.au/), as of 2026-06-02. This guide does not quote a dollar saving, because the actual number depends on the car's price, your marginal tax rate, and the lease term, so ask a licensed novated-lease or tax adviser for a figure tailored to you.

The phased wind-down announced in May 2026

In early May 2026 the government announced that the full FBT exemption for EVs will be phased out in three stages rather than continuing open-ended. The change was framed as keeping the support for mainstream, affordable EVs while reducing the cost of the concession at the top end. Existing leases were stated to be unaffected by the changes, which is the usual grandfathering approach. Sources: PwC tax alert, "Government announces phased changes to the FBT electric car exemption" (https://www.pwc.com.au/); the Minister for Climate Change and Energy joint media release (https://minister.dcceew.gov.au/); and The Driven, 4 May 2026 (https://thedriven.io/), all as of 2026-06-02.

The three phases, as announced, run like this. Phase 1, up to 31 March 2027: the full FBT exemption continues for all eligible EVs below the LCT fuel-efficient threshold, exactly as today. Phase 2, from 1 April 2027 to 31 March 2029: the full exemption applies only to eligible EVs valued at or below $75,000, while eligible EVs priced above $75,000 but below the LCT threshold receive a 25 percent discount on the FBT otherwise payable rather than a full exemption. Phase 3, from 1 April 2029: the full exemption ends, and all eligible EVs below the LCT threshold receive the 25 percent FBT discount only. Sources: PwC tax alert (https://www.pwc.com.au/) and the minister's joint media release (https://minister.dcceew.gov.au/), as of 2026-06-02.

The practical takeaway is about timing. Until 31 March 2027 nothing changes, and a sub-$75,000 EV keeps the full exemption for two more years after that. A more expensive EV is the one most affected, because it steps down to a 25 percent discount from April 2027. Because this is announced policy that still has to be reflected in enacted legislation, treat the dates and the $75,000 figure as the announced design and confirm the final detail with the ATO and a tax adviser before you sign anything. Sources: PwC tax alert (https://www.pwc.com.au/) and The Driven, 4 May 2026 (https://thedriven.io/), as of 2026-06-02.

The price cap, and why PHEVs no longer qualify

The exemption has always had a price ceiling: the car's value must be at or below the luxury car tax threshold for fuel-efficient vehicles. For the 2025 to 2026 financial year that threshold is $91,387, and it was held flat for that year. An EV priced above the threshold does not get the exemption at all, which is why the cap matters as much as the headline concession. The definition of a fuel-efficient vehicle also tightened from no more than 7 litres per 100 km to no more than 3.5 litres per 100 km from 1 July 2025, although battery electric and hydrogen vehicles are zero-emission and so are unaffected by that fuel-consumption test. Source: ATO, "Luxury car tax rate and thresholds" (https://www.ato.gov.au/), as of 2026-06-02. The threshold is set each financial year, so check the ATO figure for the year you are buying in.

Plug-in hybrids are a separate story. From 1 April 2025 a plug-in hybrid electric vehicle (PHEV) is no longer treated as a zero or low-emission vehicle for FBT purposes, so a new PHEV novated lease entered into on or after that date does not get the exemption. There is a narrow transitional carve-out: a PHEV can keep the exemption only if its use was already exempt before 1 April 2025 and there is a financially binding commitment, in place before that date, to keep providing the car, and that commitment stays unchanged. Changing the lease, for example refinancing or altering the residual, can break the commitment and end the exemption. If you are weighing a PHEV, this is the detail to check carefully. Sources: ATO, "FBT on plug-in hybrid electric vehicles" (https://www.ato.gov.au/), and Grant Thornton (https://www.grantthornton.com.au/), as of 2026-06-02.

State rebates and road-user charges

The FBT exemption is a federal benefit, and it has outlasted most of the state-level help. The direct state EV purchase rebates that ran a few years ago have largely ended: New South Wales closed its rebate and stamp-duty exemption from 1 January 2024, and the other state purchase subsidies have similarly wound up, with some states keeping smaller registration or stamp-duty concessions rather than a cash rebate. The exact mix differs by state and changes over time, so check your own state or territory revenue office for what is current. Source: Electric Vehicle Council (https://electricvehiclecouncil.com.au/), as of 2026-06-02. This is general information; confirm your state's position before you rely on it.

There is also no per-kilometre road-user charge on EVs at the moment. Victoria introduced a distance-based charge on electric vehicles, but in October 2023 the High Court of Australia ruled it invalid in Vanderstock v Victoria, on the basis that only the Commonwealth can levy that kind of charge. A federal road-user charge for EVs has been discussed but is not in force as a per-kilometre charge as of 2026-06-02, so today the running-cost advantage of an EV is not offset by a distance tax. Source: High Court of Australia, Vanderstock v Victoria [2023] HCA 30 (decided October 2023), as of 2026-06-02. Watch this space, because a future federal scheme would change the running-cost comparison.

Sources and further reading

Australian Taxation Office, "Electric cars exemption," the primary source for the eligibility rules (battery electric or hydrogen, first used on or after 1 July 2022, value at or below the LCT fuel-efficient threshold) and the standing review of the concession (as of 2026-06-02): https://www.ato.gov.au/.

Australian Taxation Office, "FBT on plug-in hybrid electric vehicles," for the 1 April 2025 PHEV cutoff and the financially-binding-commitment transitional rule (as of 2026-06-02): https://www.ato.gov.au/.

Australian Taxation Office, "Luxury car tax rate and thresholds," for the $91,387 fuel-efficient threshold for 2025 to 2026 and the 3.5 litres per 100 km fuel-efficient definition from 1 July 2025 (as of 2026-06-02): https://www.ato.gov.au/.

PwC tax alert, "Government announces phased changes to the FBT electric car exemption," and the Minister for Climate Change and Energy joint media release, for the three-phase wind-down, the $75,000 threshold from 1 April 2027, the 25 percent discount from 1 April 2029, and the grandfathering of existing leases (as of 2026-06-02): https://www.pwc.com.au/ and https://minister.dcceew.gov.au/.

The Driven, 4 May 2026, independent reporting of the same announcement (as of 2026-06-02): https://thedriven.io/. Grant Thornton, for the PHEV phase-out detail (https://www.grantthornton.com.au/), and the Electric Vehicle Council, for the status of state purchase incentives (https://electricvehiclecouncil.com.au/), both as of 2026-06-02. Always confirm the live rules with the ATO and a licensed adviser before acting, because the May 2026 reform is announced policy and implementing detail can change.

Frequently asked questions

Is the EV FBT exemption ending in Australia?: Not immediately, but it is being wound back in stages. As announced in May 2026, the full exemption continues for all eligible EVs below the luxury car tax threshold until 31 March 2027. From 1 April 2027 the full exemption applies only to eligible EVs valued at or below $75,000, while dearer eligible EVs get a 25 percent FBT discount instead. From 1 April 2029 the full exemption ends and all eligible EVs below the threshold get the 25 percent discount only. Existing leases were stated to be unaffected. Because this is announced policy, confirm the final detail with the ATO and a tax adviser. Sources: PwC tax alert (https://www.pwc.com.au/) and the minister's joint media release (https://minister.dcceew.gov.au/), as of 2026-06-02.
Which EVs qualify for the FBT exemption?: A car qualifies if it is a battery electric vehicle or a hydrogen fuel-cell vehicle, it was first held and used on or after 1 July 2022, and its value is at or below the luxury car tax threshold for fuel-efficient vehicles, which is $91,387 for the 2025 to 2026 financial year. An EV priced above that threshold does not get the exemption. Plug-in hybrids generally no longer qualify for new arrangements from 1 April 2025. Sources: ATO, "Electric cars exemption" and "Luxury car tax rate and thresholds" (https://www.ato.gov.au/), as of 2026-06-02.
Do plug-in hybrids still get the FBT exemption?: Not for new arrangements. From 1 April 2025 a plug-in hybrid is no longer treated as a zero or low-emission vehicle for FBT, so a PHEV novated lease entered into on or after that date does not get the exemption. A PHEV can keep it only under a narrow transitional rule: its use had to be exempt before 1 April 2025 and there must be a financially binding commitment, in place before that date, to keep providing the car, left unchanged. Source: ATO, "FBT on plug-in hybrid electric vehicles" (https://www.ato.gov.au/), and Grant Thornton (https://www.grantthornton.com.au/), as of 2026-06-02.
Do EVs pay a road-user charge in Australia?: Not a per-kilometre charge at the moment. Victoria's distance-based EV charge was ruled invalid by the High Court in Vanderstock v Victoria in October 2023, on the basis that only the Commonwealth can levy that kind of charge. A federal road-user charge has been discussed but is not in force as a per-kilometre charge as of 2026-06-02, so the EV running-cost advantage is not currently offset by a distance tax. Source: High Court of Australia, Vanderstock v Victoria [2023] HCA 30, as of 2026-06-02.

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