---
title: Government to wind back electric vehicle FBT exemption in three stages
description: The Government will phase out the electric vehicle FBT exemption, saving $1.7 billion over five years while promoting sustainable EV uptake.
---

[WLM Blog](https://insights.wlm.com.au/blog)

# [Government to wind back electric vehicle FBT exemption in three stages](https://insights.wlm.com.au/blog/government-to-wind-back-electric-vehicle-fbt-exemption-in-three-stages)

 Written by [James Coles](https://insights.wlm.com.au/blog/author/james-coles) | Jun 15, 2026 1:00:57 AM

The Government has announced a staged wind-back of the current Fringe Benefits Tax (FBT) exemption for electric vehicles (EVs), following recommendations from the Statutory Review of the Electric Car Discount released in May 2026. While the policy continues to support EV uptake, it also aims to make concessions more sustainable and better targeted. The changes are expected to save the Budget an estimated $1.7 billion over five years from 2025–26.

Importantly, nothing changes immediately—the existing full FBT exemption for qualifying EVs continues until 31 March 2027.

### Three-phase transition

**Phase 1 — Now until 31 March 2027**

The current rules remain fully in place.

Eligible EVs below the Luxury Car Tax (LCT) threshold (approximately $91,387 for fuel-efficient vehicles in 2025–26) continue to enjoy a complete FBT exemption.

For businesses and employees using novated leases or salary packaging, there is no change during this period.

**Phase 2 — 1 April 2027 to 31 March 2029**

The concession begins to narrow, with a focus on more affordable vehicles:

EVs costing $75,000 or less: Full FBT exemption continues if the eligibility conditions are met.

EVs priced above $75,000 and below the LCT threshold: A 25% FBT discount applies when calculating the FBT liability.

This phase is intended to encourage manufacturers to continue supplying competitively priced EVs into the Australian market, complementing the Government’s New Vehicle Efficiency Standards.

**Phase 3 — From 1 April 2029**

All eligible EVs under the LCT threshold will receive a flat 25% FBT discount, regardless of price.

The import tariff exemption for qualifying EVs remains permanently in place.

### Grandfathering of existing leases

The Government has indicated that existing arrangements will be protected: current leases will not be affected by the new rules.

Draft legislation will clarify the precise scope of this grandfathering, but businesses and employees can take some comfort that current packages will continue to qualify for existing FBT concessions.

### What this means for your business and your employees

The FBT exemption has been one of the most effective incentives driving EV adoption, particularly via novated leasing, allowing employees to access EVs using pre-tax income.

The Review found that the exemption:

- Led to around 64,000 additional battery EVs in its first three years
- Reduced emissions and improved fuel savings
- Increased EV uptake across metropolitan, regional and outer-suburban areas

However, it also highlighted equity concerns (higher-income employees benefited disproportionately) and noted that costs to the Budget were growing quickly. The new phased approach aims to balance continued access to lower-cost EVs with long-term fiscal sustainability from the Government’s perspective.

### Practical considerations for businesses and individuals

EV momentum remains strong. EV/PHEV sales reached 22.9% of new vehicles in March 2026, up from just 1.8% in May 2022, with an increasing number of models now available in the $30,000–$40,000 range.

### Next steps

These reforms maintain support for cleaner transport while tightening the focus of concessions. As always, the fine print in the amending legislation will matter, especially when it comes to transitional rules.

If you are considering acquiring an EV—personally or for your business—or want to understand the impact on salary packaging and fleet costs, our team can model the outcomes and advise on the optimal timing. Please let us know if you would like some assistance with working through your options.

 

### Need help navigating the budget changes?

 The changes to the EV FBT concession may create both opportunities and planning considerations, particularly if you are reviewing salary packaging, novated leases or fleet decisions ahead of 31 March 2027.

If you would like [tailored advice](https://www.wlm.com.au/clients/family-business/) on how the phased changes could affect your position, [contact WLM](https://www.wlm.com.au/contact/) to discuss the timing, costs and practical options available to you. 

 

[View full post](https://insights.wlm.com.au/blog/government-to-wind-back-electric-vehicle-fbt-exemption-in-three-stages)

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