The Australian federal government will make changes to the fringe benefits tax (FBT) exemption for electric vehicles to deliver a fairer and more financially viable tax for EVs.
The adjustments are expected to save the budget AU$1.7 billion over five years. The government states that the rapid maturity of the local EV market, partly driven by the New Vehicle Efficiency Standard, means it is time to transition towards a permanent 25 per cent FBT discount.
The overhaul will roll out progressively across three distinct phases, ensuring existing vehicle leases remain completely unaffected.
In phase one, the current full FBT discount remains completely unchanged until the end of March 2027.
In the second phase, between April 2027 and April 2029, the full FBT discount will strictly apply to EVs priced at $75,000 or less. Models priced above this cap but under the luxury car tax threshold will see their benefit reduced to a 25 per cent discount on payable FBT.
In the third phase, starting from April 1, 2029, all electric vehicles sitting beneath the luxury car tax threshold will transition to the permanent 25 per cent FBT discount.
Importantly for car buyers, eligible electric vehicles will remain permanently exempt from import tariffs.
The EV market has matured in recent years. In May 2022, EVs and plug-in hybrids made up just 1.8 per cent of new car sales but by March 2026, that figure skyrocketed to 22.9 per cent.
Affordable choices have also grown, expanding from just two models under AU$40,000 to around 10, including Australia’s first sub-AU$30,000 electric car.
Interestingly, the highest uptake of the EV tax cuts has occurred outside capital city centres, with regional hubs and outer suburbs like Gosford, Kellyville, Werribee, and Toowoomba leading the charge.
The policy shift follows the Electric Car Discount Review, which concluded that the initial scheme successfully boosted EV adoption and cushioned Australians against volatile global oil prices.
