- The existing full FBT discount continues for eligible EV arrangements through 31 March 2027.
- From 1 April 2027 to 31 March 2029, new eligible EVs costing $75,000 or less keep the full discount; higher-value eligible EVs below the fuel-efficient LCT threshold receive a 25% FBT discount.
- From 1 April 2029, new eligible EVs below the fuel-efficient LCT threshold are scheduled to receive a 25% discount rather than the full exemption.
- Existing eligible arrangements retain the FBT discount rate applying when they commenced, subject to the rules and continuity of the arrangement.
- Plug-in hybrids generally stopped qualifying for new exempt arrangements from 1 April 2025.
What the EV FBT exemption does
Where the legal requirements are met, private use of an eligible electric car and associated car expenses can receive a fringe benefits tax discount. This is particularly relevant to novated leasing because vehicle finance and eligible running costs may be salary packaged with substantially different tax treatment from a conventional petrol or diesel vehicle.
The benefit is not a cash rebate and it does not remove the finance repayment, residual value, fees or running costs. It changes how the car benefit is treated for FBT, which can affect the mix of pre-tax and post-tax salary deductions.
The EV FBT timetable
| When a new arrangement starts | EV value | Scheduled FBT treatment |
|---|---|---|
| Now to 31 March 2027 | At or below the applicable fuel-efficient LCT threshold | Full FBT discount if all eligibility rules are met |
| 1 April 2027 to 31 March 2029 | $75,000 or less | Full FBT discount |
| 1 April 2027 to 31 March 2029 | Above $75,000 but at or below the fuel-efficient LCT threshold | 25% discount on payable FBT |
| From 1 April 2029 | At or below the fuel-efficient LCT threshold | Permanent 25% discount on payable FBT |
| Any period | Above the applicable fuel-efficient LCT threshold | Not eligible for the electric car discount |
The ATO lists the fuel-efficient luxury car tax threshold for 2026–27 as $91,661. The threshold is indexed and can change each financial year. Vehicle eligibility uses the relevant value and timing rules—not simply an advertised drive-away price.
Why $75,000 becomes important from April 2027
Until 31 March 2027, the current full discount continues for eligible EVs below the fuel-efficient LCT threshold. For new arrangements beginning from 1 April 2027, the Government's timetable focuses the full discount on EVs valued at $75,000 or less. Eligible EVs above $75,000 but below the LCT threshold move to a partial discount.
This makes model grade, factory options and timing important. A vehicle close to the line should be checked carefully using the tax value relevant to the exemption. Do not assume that a dealer's base price, a temporary drive-away offer or the amount financed is the exact test value.
Existing leases and grandfathering
The Government states that existing arrangements will not be affected by the changes and that eligible EVs retain the discount rate applying when the arrangement commenced. However, refinancing, materially changing or replacing an arrangement may require specific review. Confirm the effect before altering a lease.
Basic eligibility questions
- Is it the right vehicle type? Battery electric and hydrogen fuel-cell cars may qualify. A conventional hybrid does not.
- Was the car first held and used at the correct time? The original exemption applies to eligible cars first held and used on or after 1 July 2022.
- Was it below the applicable value threshold? It must meet the LCT-related value requirement.
- When does the arrangement commence? The discount rate increasingly depends on commencement date and value.
- Does your employer allow the arrangement? Employer and administrator rules still apply.
Plug-in hybrids are treated differently
Plug-in hybrid electric vehicles generally stopped being eligible for new exempt benefits from 1 April 2025. A limited transitional rule can apply to qualifying pre-existing commitments, but changes to lease payments, residual value or the arrangement may affect continuity. A PHEV should never be quoted as FBT-exempt without checking its specific history.
Reportable fringe benefits still matter
Even when an eligible electric car benefit receives the full FBT discount, the notional taxable value can remain reportable. A reportable fringe benefits amount does not usually form part of taxable income, but it can affect income tests used for matters such as HELP repayments, Medicare levy surcharge, child support and some government benefits.
Does an FBT discount guarantee an EV novated lease is cheaper?
No. It can materially improve the comparison, but total value still depends on the vehicle price, interest rate, fees, residual, annual kilometres, insurance, tyres, charging and the alternative way you would buy and run the car. High finance costs or poor vehicle value can offset part of the tax benefit.
An EV quote prepared today should show the rules assumed at the intended commencement date. If delivery may occur after 31 March 2027, the comparison should be recalculated under the later settings before you commit.
General information only: This guide is not tax, financial, credit or legal advice. Legislation, ATO guidance and thresholds can change. Confirm current treatment with the relevant employer, provider and a qualified adviser.