The Australian Government has announced a phased transition for its electric vehicle (EV) discount policy, aiming to balance the promotion of sustainable transport with long-term fiscal sustainability. The current fringe benefits tax (FBT) exemption, which has been a cornerstone of federal support for EV adoption since 2022, will remain unchanged until 31 March 2027. This policy allows employers to provide EVs to employees through salary packaging without incurring the standard fringe benefits tax, significantly lowering the cost of ownership for many Australians.
Following the initial period, the government will introduce a tiered system starting 1 April 2027. Under these new rules, the full FBT exemption will be restricted to electric vehicles priced at $75,000 or less. Vehicles costing more than this amount, but still below the luxury car tax threshold, will transition to a 25% discount on payable FBT. By 1 April 2029, this 25% discount will apply to all eligible electric vehicles under the luxury car tax limit, marking a permanent shift in how the government subsidizes the transition to cleaner transport.
These changes are designed to encourage manufacturers to bring more affordable EV models to the Australian market. Officials noted that the market has matured significantly since the policy was first introduced, with a wider variety of lower-cost options now available to consumers. The government estimates these adjustments will save the federal budget approximately $1.7 billion over five years, while still providing meaningful support for families and businesses looking to switch to electric cars.
Importantly, the government has confirmed that existing novated leases will not be affected by these upcoming changes. Any lease established on or before 31 March 2027 will be grandfathered, ensuring that current participants retain their existing tax benefits for the duration of their agreements. This approach aims to provide certainty for consumers who are currently considering an electric vehicle purchase.