The Albanese Government has announced a series of carefully staged adjustments to the Fringe Benefits Tax (FBT) exemption for electric vehicles — a policy known as the Electric Car Discount. While the support remains in place, new rules will focus the full benefit on more affordable models and transition all EVs to a permanent 25% FBT discount by 2029.
Background
Australia’s EV market has changed dramatically. When the current exemption was introduced, only two EVs were priced under $40,000. Today there are around 10 such models — including one under $30,000 for the first time. In March 2026, 22.9% of new cars sold were electric or plug-in hybrid, up from just 1.8% in May 2022.
The Statutory Review of the Electric Car Discount found the scheme successfully encouraged uptake, reduced emissions, and helped soften the impact of global oil price fluctuations. With the market now more mature, the Government has adjusted settings to ensure tax support remains targeted and fiscally responsible.
The Three-Phase Transition
The changes are being introduced progressively and are expected to save the Federal Budget $1.7 billion over five years from 2025–26.
Phase 1: Now Until End of March 2027
- The existing full FBT exemption continues in full — no changes yet.
- All eligible EVs below the luxury car tax (LCT) threshold remain fully exempt from FBT.
Phase 2: 1 April 2027 – 1 April 2029
- Full FBT exemption applies only to EVs priced at $75,000 or less.
- EVs priced above $75,000 (but below the LCT threshold) receive a 25% discount on their payable FBT.
Phase 3: From 1 April 2029
- All eligible EVs below the LCT threshold receive a permanent 25% discount on payable FBT.
- The full exemption for vehicles ≤$75,000 transitions to this unified 25% discount rate.
What Stays the Same
- Existing leases are not affected by any of the changes.
- Eligible EVs will continue to be exempt from import tariffs on an ongoing basis.
