Let me be straight with you- nobody has a crystal ball on this one.
If you’ve been following the news lately, you’ve probably seen the chatter building around the EV FBT exemption and what the May 2026 Federal Budget might mean for novated leasing. And if you’re anything like most people I speak with, your first question is: is this actually going to affect me?
Fair question. Let me tell you what I know, what I think and what I’d be doing if I were in your shoes.
So what’s actually going on with the EV FBT exemption?
Right now, eligible battery electric vehicles (BEVs) accessed through a novated lease or employer arrangement are fully exempt from Fringe Benefits Tax – as long as the car is priced below the Luxury Car Tax threshold of $91,387 and was first held and used after 1 July 2022. That’s a genuinely significant benefit. For someone on a $120,000 salary, the savings over a five-year lease can exceed $15,000 compared to leasing a comparable petrol vehicle.
But here’s where it gets interesting.
A formal government review of the Electric Car Discount is currently underway, officially running from February 2026 with a final report expected by mid-2027. The cost of the exemption has ballooned well beyond original forecasts, it was originally projected to cost around $87 million a year, but is now costing $1.3 billion, roughly 15 times the initial estimate. That kind of number gets Treasury’s attention.
Options reportedly on the table include restricting the exemption to lower-priced models, reducing its overall value, or ending it for new arrangements entirely.
And with the May 2026 Budget approaching fast, the timing of any decision matters.
But here’s what’s shifted in the last few weeks
With fuel prices spiking sharply – pump prices are up around 40% following disruptions to global oil supply – the political calculation has changed. The government has pushed back on calls to scrap the exemption, pointing to its cost-of-living and emissions benefits, with a senior source indicating the exemption would likely be tweaked rather than scrapped.
That’s encouraging, but “tweaked” still means change. And change on a benefit this significant is worth paying attention to.
What could actually change and what it means for you
A few scenarios are on the table: the EV FBT exemption stays as is, it gets means-tested or capped at a lower price threshold, or it’s removed for new novated leases going forward.
Here’s the important part: if you enter into a novated lease under the current rules before any budget changes are announced, you are generally able to retain the exemption for the duration of that lease – even if the rules change for new arrangements after you sign.
That’s not a loophole, it’s simply how these policy transitions typically work. Existing arrangements are usually protected. New ones bear the new rules.
Which is why if you’re considering an EV, now is the time to get moving on a decision.
My honest read on where this lands
I don’t think the exemption disappears entirely. The political pressure around fuel prices and cost of living makes a full rollback a tough sell right now, and the government itself has signalled as much.
What feels more likely is a refinement: tighter eligibility, a lower price cap, or more targeted access. A recalibration, not a demolition.
But I could be wrong. And “I reckon it’ll probably be fine” isn’t a strategy worth betting thousands of dollars on.
So what would I do?
If you’ve been sitting on the fence about an electric vehicle novated lease, I’d be having that conversation now – not because I want to rush you, but because right now the rules are clear, the FBT exemption is real, and the uncertainty is coming regardless of which way the Budget lands.
We’ll all know more after May 12. But by then, some people will have acted and some won’t and for those who haven’t, the opportunity may already look different.
If you want to talk through your options before then, we’re here. No pressure, no hard sell – just a straight conversation about what makes sense for you.
