EV tax perk changes are coming - timing now matters

From April 2027, Australia will scale back EV FBT breaks for cars over $75,000. Early adopters could lock in savings, but the window is narrowing.

Australia's generous electric vehicle tax break is being wound back, shifting from a full FBT exemption to a phased reduction that will reshape the economics of novated leases.

Currently, many EVs provided through salary packaging or novated leases can be completely exempt from FBT, which has been a major driver of uptake.

What is changing with EV FBT exemptions in Australia?

Under the proposed changes:

• From April 2027, the full exemption will be restricted, particularly for higher-priced vehicles
• Vehicles above around $75,000 will no longer receive the full exemption, instead moving to a partial (around 25%) FBT discount
• By April 2029, all eligible EVs will lose the full exemption and instead receive only a reduced FBT concession

Importantly, existing arrangements - particularly novated leases already in place - are expected to be grandfathered, meaning current users won't be retrospectively impacted.

Who loses the most from the FBT changes?

The biggest impact will be felt by:

• Employees using novated leases, where the FBT exemption has been a key financial advantage
• Higher-income earners, who have disproportionately benefited from the scheme to date
• Buyers of higher-value EVs, especially those above the $75,000 threshold

The reason this matters is that the FBT exemption has been worth thousands of dollars per year in tax savings under a novated lease. Removing or reducing that benefit will directly increase the after-tax cost of running an EV through salary packaging.

In practical terms, this could mean higher lease costs, reduced salary packaging benefits and a narrowing of the financial gap between EVs and traditional vehicles.

Should you buy or lease an EV before 2027?

Timing is becoming critical.

For Australians considering an EV, acting sooner rather than later may lock in the current, more generous tax treatment - particularly if entering into a novated lease before the rules change.

Waiting until after April 2027 could mean materially lower tax benefits, especially for mid-to-high priced vehicles

This creates a potential "pull-forward" effect, where demand increases in the short term as buyers try to secure the full exemption before it is scaled back.

However, it's also worth noting that EV purchase prices are gradually falling and running costs remain significantly lower than petrol vehicles.

So while tax benefits may reduce, the overall value proposition doesn't disappear.

Will EVs still be cheaper than petrol cars?

Even with the changes, EVs are still likely to remain relatively tax-effective, but the advantage will be less pronounced.

A 25% FBT concession is still meaningful compared to the full FBT liability that applies to petrol or diesel vehicles.

EV also continue to benefit from lower running and maintenance costs, which sit outside the tax system.

For many users, particularly high-kilometre drivers, the total cost of ownership may still favour EVs

That said, the changes do signal a shift from "highly tax-driven decision" to more of a balanced cost and lifestyle decision.

Are EV tax breaks being removed completely?

One of the biggest misconceptions is that the EV tax break is being completely removed - it's not. It's being scaled back, not scrapped entirely.

Other key points people may overlook:

1. Grandfathering matters

Many existing arrangements are likely to be protected, so current lease holders may not be affected at all.

2. Not all EVs will be treated equally

Higher-priced vehicles will lose access to the most generous concessions first, which is a deliberate policy shift toward more "affordable EVs."

3. The tax benefit was never the whole story

Some buyers have focused heavily on the FBT exemption without considering:

• Running costs
• Charging infrastructure
• Resale value

4. Behavioural risk

There's a risk that some people rush into a novated lease purely for tax reasons without fully understanding the long-term financial commitment.

Conclusion

The FBT changes mark a transition from very generous, early-adoption incentives to a more targeted and sustainable policy.

For taxpayers, there's still a window to access the current benefits but the decision should be based on overall economics, not just tax savings.

For the market, EVs are likely to remain attractive but less of the decision will hinge on tax - and more on cost, practicality and long-term value.

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