PHEVs Lose Fringe Benefits Tax Exemption While EV Incentives Remain

Australian motorists looking to purchase a plug-in hybrid vehicle (PHEV) through a novated lease are waking up to a major change, one that could cost them thousands. As of April 1, 2025, PHEVs are no longer eligible for the Fringe Benefits Tax (FBT) exemption, despite full battery electric vehicles (EVs) continuing to enjoy the tax benefit indefinitely.

▶️MORE: PHEV Tax Break (FBT Exemption) Set to End

What This Means for Buyers

Since its launch in July 2022, the FBT exemption has provided significant savings for Australians looking to drive an electric or plug-in hybrid vehicle through salary packaging. By covering the cost of what would normally be an employer’s FBT bill, the government helped make EVs and PHEVs more affordable, with some buyers saving up to five figures annually.

However, while EVs will continue to benefit from this incentive, PHEVs had a clear expiry date from the start—April 1, 2025. That deadline has now passed, meaning any PHEV purchased through a novated lease will no longer receive the same tax break.

▶️MORE: Electric Car FBT Exemption Explained (2025)

Impact on the Market

The FBT exemption has undeniably shaped Australia’s transition to cleaner transport. Data from the National Automotive Leasing and Salary Packaging Association (NALSPA) shows that over 100,000 novated leases have been taken out for eligible EVs and PHEVs since the program began.

Australia’s EV adoption has grown significantly, rising from just 1.8% of the new car market when the scheme was introduced to 7.4% by the end of 2024. Meanwhile, PHEVs have also seen an increase, moving from below 1.0% to nearly 2.0% of the market.

▶️MORE: Electric Car Incentives in Australia: State by State Guide (2025)

Here’s how EV and PHEV sales have evolved since the FBT exemption was introduced:

While EVs have outsold PHEVs by a significant margin, the early months of 2025 have shown an unexpected surge in plug-in hybrid demand, rising by an incredible 222.2% compared to the same period in 2024. This is likely due to consumers rushing to take advantage of the tax break before the deadline.

▶️MORE: Introduction to Electric Vehicles: BEV vs PHEV vs HEV

Will PHEV Sales Drop Without the Tax Perk?

A key factor in the PHEV sales boom has been the arrival of new models from brands like BYD, which introduced the Sealion 6 mid-size SUV last year and the Shark 6 ute in early 2025. These vehicles have helped bolster PHEV numbers, but whether that momentum continues without the FBT exemption remains to be seen.

With the tax break still in place for fully electric vehicles, it’s likely that some potential PHEV buyers will now pivot towards going all-electric instead. This shift could accelerate Australia’s EV adoption even further, as the financial incentive makes EV ownership more attractive.

▶️MORE:How You Save Money on an Electric Car Novated Lease

Looking Ahead

The removal of the FBT exemption for PHEVs marks a a critical juncture in Australia’s push towards electrification. While the government continues to support EVs, the phasing out of PHEV incentives suggests a longer-term focus on fully electric mobility rather than transitional technologies.

For those still on the fence between a PHEV and an EV, the financial landscape has changed, going fully electric may now be the smarter choice. With new EV models entering the market regularly and infrastructure improving across the country, the transition to zero-emission driving is becoming increasingly compelling.

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