Australia’s 2025-2026 Federal Budget has delivered continued financial support for electric-vehicle uptake EV, but underdelivers on some energy transition initiatives.
The government will transition the arrangements to support electric vehicles to a permanent 25 per cent fringe benefits tax (FBT) discount, for eligible vehicles over AU$75,000 from April 1, 2027 and for all eligible EVs from April 1, 2029.
EVs costing up to AU$75,000 will continue to receive a full FBT exemption provided the fringe benefit arrangement commences before April 1, 2029.
These changes reflect the recommendations of the statutory review of the electric car discount policy. They will further incentivise the supply of more affordable electric cars, while moving to more sustainable settings for the future.
The National Automotive Leasing and Salary Packaging Association (NALSPA) welcomed the extension, noting that the policy is central for reducing the cost of living.
By making EVs more affordable through FBT exemptions and novated leasing, the government is helping families transition to cars that are significantly cheaper to run.
“Australians looking to save money on driving are huge winners in this federal budget,” NALSPA CEO Rohan Martin said.
“The Albanese government’s commitment to the Electric Car Discount means more Australians can afford to switch to cheaper-to-run cars and avoid pain at the bowser.”
Polling suggests the discount is doing exactly what it was designed to do: most Australians who purchased an EV using the discount wouldn’t have made the switch without it.
The budget also looks beyond the car itself, allocating AU$97.3 million to a reform package for Consumer Energy Resources (CER).
This includes $25.3 million to establish a National Technical Regulator, tasked with coordinating the 4.3 million rooftop solar systems, home batteries, and EVs now plugged into the Australian grid.
The government estimates that better coordination of rooftop solar, batteries and future vehicle‑to‑grid resources could reduce electricity system costs by more than $7 billion by 2050.
Lacklustre energy transition funding
While EV drivers are celebrating, climate advocacy groups have offered a more sober assessment of the budget.
Climate Energy Finance (CEF) gave the government an “F” on fossil fuel tax reform. The budget lacked any big-ticket new commitments to grow Australia’s position as a renewables superpower and zero-emissions leader.
The budget saves AU$1.3 billion over 10 years from redirecting part of the $19.7bn 2024–25 Budget measure for Future Made in Australia (FMIA) program, and AU$1.9 billion is rightly cut from Hydrogen Headstart.
The CEF noted a key missed opportunity was reform of fuel taxes and subsidies. The government declined to introduce a proposed 25 per cent gas exports levy at a moment when prices are hyperinflated due to the ongoing Middle East crisis.
In addition, the AU$11 billion annual cost of the diesel Fuel Tax Credit Scheme remained untouched, leaving taxpayers out of pocket and disincentivising mining majors – its key beneficiaries – from investing in decarbonisation.
Despite these critiques, the budget does include a massive $7.2 million home battery scheme and increased funding for the Clean Energy Finance Corporation (CEFC).
“This budget reflects the many competing needs facing Australians,” said Tim Buckley, Director of Climate Energy Finance.
“A glaring omission in this budget was the failure yet again to reform fossil fuel taxes and subsidies.
“A good start, but we need to be more ambitious yet, the cost of climate inaction is simply too extreme to allow.”
