Key Points
- The Albanese government will keep the EV FBT exemption, with only minor tweaks likely.
- Fuel prices have risen about 40% in the past month after the conflict in Iran began.
- The FBT exemption applies to EVs under $91,000 and is now costing $1.3 billion a year.
The Albanese government is set to keep the electric vehicle fringe benefits tax (FBT) exemption. The scheme will likely be tweaked rather than overhauled or scrapped, according to a senior government source.
The news comes as fuel prices have risen about 40% in the past month. The spike follows the start of the conflict in Iran, which has disrupted global oil supply. The story was first reported by the Australian Financial Review (AFR).
What Is the EV FBT Exemption?
The FBT exemption lets employees avoid fringe benefits tax when they lease an eligible EV through their employer. It is one of the most valuable EV incentives in Australia.
Currently, the exemption applies to EVs priced under $91,000. That is the threshold where the luxury car tax begins. Plug-in hybrids (PHEVs) were removed from the scheme at the start of April 2025.
EV FBT Exemption: Key Details
Detail | Info |
Who benefits | Employees who lease an EV through their employer |
Price cap | Under $91,000 (luxury car tax threshold) |
Annual cost to budget | $1.3 billion (2025-26) |
Original forecast | About $87 million per year |
PHEVs included? | No. PHEVs were removed from April 2025 |
Status | Continuing, minor tweaks possible |
Why the Government Is Keeping It
The FBT exemption was originally forecast to cost around $87 million a year. It is now costing $1.3 billion. That is 15 times the original estimate. In the lead-up to the May budget, the government had been considering means-testing the scheme or lowering the eligible car price cap.
But with EV sales surging due to the fuel crisis, the government does not want to slow that momentum. Prime Minister Albanese pointed to this when he rejected calls from the opposition to cut EV support.
“They have called for cuts to things that are making a difference to cost of living, such as batteries,” Albanese said. “They have called for cuts to EV support. I do not think there is anyone out there today who has bought an electric vehicle who is regretting the decision at this point in time.”
The Fuel Crisis Context
Fuel prices in Australia have jumped about 40% in the past month. The Iran conflict has tightened global oil supply and pushed pump prices to record levels. Drivers are feeling the pressure at the bowser.
The opposition, led by Angus Taylor, called for an immediate halving of the 52.6 cents per litre fuel excise for three months. Taylor proposed paying for it by scrapping the FBT exemption for EV leases, among other measures.
The government rejected that approach. Economists have also warned that cutting the fuel excise during a supply crunch could increase demand at a time when supply cannot be guaranteed.
What Could Change
The government has not ruled out all changes. A senior source said the exemption would likely be tweaked. Options on the table include means-testing the benefit or adjusting the eligible price cap.
For now, the scheme remains open to any EV under $91,000. If you are considering a novated lease, the exemption is still available.
The Opposition's Position
Opposition Leader Angus Taylor argued the FBT exemption is too expensive. He said the $1.3 billion annual cost should be redirected to fuel relief for all Australians, not just those who can afford to lease a new EV.
The government pushed back, saying the exemption is driving real cost-of-living benefits for EV drivers and helping cut emissions.
Opposition vs Government: Key Positions
Opposition (Taylor) | Government (Albanese) | |
FBT Exemption | Scrap it | Keep it, minor tweaks only |
Fuel Excise | Cut by half for 3 months | Rejected |
Home Battery Subsidy | Pause it | Keep it |
Green Hydrogen Subsidies | Abolish | Keep it |
About the author
Danny Thai
Danny is a consultant and entrepreneur working at the cutting edge of the electric vehicle and energy transition. He is passionate about educating and helping consumers make better decisions through data.
Stay up to date with the latest EV news
- Get the latest news and update
- New EV model releases
- Get money savings-deal
