EV FBT Exemption Changes: What the Federal Budget Means for Electric Car Novated Leases
The Federal Budget has confirmed important changes to the EV FBT exemption, also known as the electric vehicle Fringe Benefits Tax exemption.
For employees considering an electric car novated lease, the good news is that the exemption is not ending immediately. Eligible electric vehicles can still receive strong tax benefits through salary packaging and novated leasing.
However, the rules are changing over time, which means timing now matters.
For employees and businesses, the key message is simple: EV tax savings are still available, but the window for the full FBT exemption is narrowing.
What is the EV FBT exemption?
The EV FBT exemption allows eligible electric vehicles to be provided through arrangements such as a novated leaseor salary packaging without attracting Fringe Benefits Tax.
This has made an EV novated lease one of the most tax-effective ways for eligible employees to drive an electric car in Australia.
Through a novated lease, employees may be able to package their electric vehicle repayments and running costs using pre-tax income, helping reduce the overall cost of driving an EV.
What has changed with the EV FBT exemption?
The Federal Government has announced a phased change to the current electric car FBT exemption.
The full FBT exemption will continue in the short term, but from 2027 it will start to narrow, particularly for higher-priced electric vehicles.
Key EV FBT exemption dates
Until 31 March 2027
The current full FBT exemption for eligible electric vehicles continues to apply.
This means eligible employees can still access the current benefit when leasing an electric car through a novated lease arrangement.
From 1 April 2027 to 31 March 2029
The full FBT exemption will continue for eligible EVs valued at $75,000 or less.
For EVs valued above $75,000 but below the fuel-efficient luxury car tax threshold, the benefit will reduce to a 25% discount on FBT payable. PwC’s Budget analysis also summarises this phased approach, noting the full exemption continues until 31 March 2027 before narrowing from 1 April 2027.
From 1 April 2029
The full EV FBT exemption will no longer apply.
Instead, eligible electric vehicles below the fuel-efficient luxury car tax threshold will receive a permanent 25% FBT discount. The ATO’s current guidance confirms eligible electric cars and associated car expenses can be FBT exempt under the current rules, while recent Budget analysis confirms the announced phase-down.
What does this mean for electric car novated leases?
For employees looking at an electric car novated lease, the Budget confirms there is still time to take advantage of the current EV FBT exemption.
However, the full benefit will not be available indefinitely.
This means employees considering an EV may benefit from exploring their options sooner, especially if they are looking at an eligible electric vehicle under $75,000.
What does this mean for salary packaging an electric vehicle?
For employees, salary packaging an electric vehicle through a novated lease can still be a cost-effective way to drive an EV.
Because eligible EVs can currently receive FBT-exempt treatment, more of the vehicle costs may be paid from pre-tax income compared to a standard car arrangement.
This can make an EV novated lease appealing for employees who want to reduce running costs, access potential tax savings, and make the switch to a lower-emissions vehicle.
What does this mean for employers?
For employers, the Federal Budget changes create a timely opportunity to educate staff about EV salary packagingand novated leasing.
Many employees may now be searching questions such as:
- Is the EV FBT exemption ending?
- Are electric cars still FBT exempt?
- Should I get an EV novated lease before 2027?
- What EVs are under the $75,000 threshold?
- How does salary packaging an electric car work?
By helping employees understand the changes, businesses can continue offering a valuable workplace benefit without needing to increase salaries.
Is the EV FBT exemption ending?
Not immediately.
The EV FBT exemption is not gone, but it is changing.
Eligible electric vehicles can still access strong tax benefits in the short term. However, from 2027, the full exemption will start to narrow, and from 2029, it will shift to a permanent 25% FBT discount.
For employees considering an electric car, this makes now a smart time to review novated lease options.
Considering an EV novated lease?
Supalease can help employees and businesses understand what the EV FBT exemption changes mean in practical terms.
Whether you are comparing electric cars, looking at salary packaging, or wanting to understand the potential tax benefits of an EV novated lease, our team can guide you through the process.
The EV FBT exemption is still available – but the rules are changing.
Speak to Supalease today about an electric car novated lease
