Key Points
- Full FBT exemption retained until 31 March 2027, no change to current rules
- From 1 April 2027: full exemption only for EVs under $75,000; 25% FBT discount for EVs $75k–$91,387
- From 1 April 2029: 25% FBT discount for all EVs below the luxury car tax threshold — no full exemption
The Government has confirmed in a media release that that Australia's popular EV tax break (EV FBT Exemption) for electric vehicles purchased through novated leases will not be scrapped, instead it will be restructured in three phases.
- Phase 1 (Now → 31 March 2027): No change
- Phase 2 (From 1 April 2027): New $75k threshold
- Phase 3 (From 1 April 2029): Scaled back
What has been confirmed
The federal government has confirmed a three-phase restructure of the EV FBT exemption.
Phase 1 (Now → 31 March 2027): No change
Until 31 March 2027, the existing rules apply. Currently, eligible vehicles must sit below the annual fuel-efficient luxury car tax threshold ($91,387 for 2025/2026). The threshold includes vehicle base price, GST, options, and dealer delivery). That threshold rises each year and now captures a broad range of EVs, including many 'premium' models.
Currently over 160 variants are eligible for the FBT exemption.
Phase 2 (From 1 April 2027): $75,000 price threshold introduced
From 1 April 2027, the full FBT exemption applies only to EVs priced under $75,000. EVs priced between $75,000 and the luxury car tax threshold ($91,387) receive a 25% FBT discount instead of the full exemption.
The government stated that the $75,000 threshold is designed to encourage manufacturers to offer more affordable EVs, while continuing to support mainstream buyers.
Of the ~260 EV variants currently available for sale in Australia, over 120 variants are priced below $75,000 and will remain eligible for the full FBT exemption under the confirmed threshold.
Popular models such as the Tesla Model Y L AWD and Zeekr 7x Performance currently sit just outside the new threshold and will only be eligible for the 25% FBT discount band rather than receiving full exemption. This could change however depending on future pricing and fleet discounts available.
Other popular models which were preivously eligible, will likely be ineligible for the full discount come 1 April 2027, these include: Tesla Model 3 Performance, Tesla Model Y Performance, BMW iX1, BMW iX2, BMW iX3, Mercedes-Benz EQA 250+, Polestar 4.
You can check which models will sit outside the new limits using zecar's EV Database.
Phase 3 (From 1 April 2029): Discount reduced to 25% for all BEVs under the LCT limit
From 1 April 2029, all eligible electric vehicles under the luxury car tax threshold (currently $91,387) will receive a 25% FBT discount instead of the full exemption.
This means even the cheapest EVs like the BYD Atto 1 will no longer be eligible for the full FBT exemption and will be subject to the 25% discount.
Existing novated leases: grandfathered
The government confirmed that the new rules apply only to new novated leases entered into after the relevant phase start dates. Existing leases are grandfathered and are not subject to the phase changes.
Existing lease holders are not affected by the phase changes. Their current arrangements continue under the rules that applied when the lease was entered into.
What it means in dollars
The new rules mean from 1 April 2027 for EVs above $75,000 will now cost thousands of dollars more under a novated lease although still likely cheaper than purchasing outright.
Below are indicative examples of the impact of the confirmed three-phase structure on different income levels and vehicle models.
Worked Example 1: Employee on $150,000 salary
| Field | Details |
| Model | Tesla Model Y L AWD |
| Price | $76,700 (MSRP + Delivery charges) |
| Lease Term | 5 years |
Current rules (Phase 1, until 31 March 2027): Full FBT exemption applies. Estimated total savings of $38,266 over a 5-year lease or $7,653 p.a.
Phase 2 (1 April 2027, under $75,000 threshold): The Tesla Model Y L AWD is above the LCT threshold and will receive a 25% FBT discount. Estimated total savings of over a 5-year lease $17,372 or $3,474 p.a.
Under Phase 2, the Tesla Model Y L AWD will cost $20,894 more than the existing rules but will still be cheaper than purchasing outright (if home loan interest costs are accounted for).
Thinking about a Tesla Model Y? Lease it through Flare Cars before the rules changePhase 3: (From 1 April 2029), all EVs under LCT: Because the Model Y L AWD is above $75,000 and under the LCT it will still be eligible for the reduced 25% discount.
Worked Example 2: Employee on $80,000 salary
| Field | Details |
| Model | BYD Atto 2 Premium |
| Price | $37,090 (MSRP + Delivery charges) |
| Lease Term | 5 years |
Current rules (Phase 1, until 31 March 2027): Full FBT exemption applies. Estimated total savings of $17,670 over a 5-year lease or $3,534 p.a.
Phase 2 (1 April 2027, under $75,000 threshold): Full FBT exemption applies as model is under $75,000. Estimated total savings remains the same.
Phase 3: (From 1 April 2029), all EVs under LCT: The Atto 2 will receive a reduced 25% FBT discount. Estimated total savings of over a 5-year lease $8,768 or $1,754 p.a.
Under the changes to be implemented in phase 3 the BYD Atto 2 Premium will cost $8,902 more than the existing rules but will still be cheaper than purchasing outright (if home loan interest costs are accounted for).
The full FBT exemption ends 31 March 2027 — start your novated lease with Flare Cars todayDISCLAIMER: zecar is not a financial adviser. You should consider seeking independent legal, financial, taxation or other advice to check how the website information relates to your unique circumstances.
zecar is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this website.
About the author
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.
