More sustainable settings to support take‑up of electric cars

2026–27 AUsTRALIAN TAX REFORM

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Electric Cars

As part of the 2026–27 Federal Budget, the Australian Government has announced targeted changes to the fringe benefits tax (FBT) concession for electric vehicles (EVs). The current full FBT exemption for eligible EVs will be phased down into a tiered, permanent discounted regime, with grandfathering protections for existing arrangements. Below is a structured summary of the rule changes and transitional arrangements.

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1. The Permanent Rule (From 1 April 2029 onwards)

From 1 April 2029, the full 100% FBT exemption officially ends for new arrangements. It will be replaced by a permanent 25% FBT discount for eligible electric cars.

The Mechanism

Instead of the standard 20% statutory formula rate used to calculate car fringe benefits, eligible EVs will use a reduced 15% statutory rate.

The Cap

This permanent discount only applies to electric cars valued up to and including the fuel-efficient luxury car tax (LCT) threshold. Any EV costing above this threshold will revert to the standard 20% rate.

2. The Transitional Arrangements (The Timeline)

To phase in the new rules, the Government has introduced transitional pathways based on the car’s value and when it is provided to the employee:

Under $75,000 (Before 1 April 2029)

If the EV is valued up to and including $75,000 and is provided to the employee before 1 April 2029, it qualifies for the 100% FBT discount (a 0% statutory rate).

Over $75,000 (Between 1 April 2027 and 1 April 2029)

If the EV is valued above $75,000 but remains under the fuel-efficient LCT threshold, and is provided between 1 April 2027 and 1 April 2029, it skips the 100% window and goes straight to the 25% FBT discount (a 15% statutory rate).

3. The Grandfathering Protection (Crucial for Existing Leases)

There is excellent news for investors and business owners who have already committed to an EV strategy: existing arrangements are protected.

All eligible electric cars will fully retain the exact FBT discount rate that was in place when their specific lease or employment arrangement commenced. If you secured a 100% exemption, it remains locked in for the life of that arrangement.

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Vehicle category	Timing of provision	FBT statutory formula rate	Level of discount
EV ≤ A$75,000	Before 1 April 2029	0%	100% discount (full exemption)
EV > A$75,000 and ≤ fuel-efficient LCT threshold	1 April 2027 – 1 April 2029	15%	25% discount
All eligible EVs ≤ fuel-efficient LCT threshold	From 1 April 2029 onwards	15%	25% discount (permanent)
EV > fuel-efficient LCT threshold; all petrol/diesel/hybrid cars	All periods	20%	No discount (standard rate)

Note: Reportable fringe benefits for eligible EVs are calculated using the standard 20% statutory rate, regardless of the applicable FBT discount rate.

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