The EV tax break is still here — but the full exemption window is closing.
For an eligible electric car, the way you fund it changes the price you actually pay. A novated lease on an FBT-exempt EV comes out of pre-tax salary; a green car loan is repaid from post-tax income. That exemption is what makes leasing so cheap right now — and it's being wound back from April 2027. Here's exactly how the phase-out lands, and how to think about EV finance while the full break still applies.
The FBT exemption doesn't switch off. It steps down.
As at July 2026 the electric-car FBT exemption is still fully in place. Following Treasury's statutory review, the Government announced on 5 May 2026 a phased wind-back over two steps — but leases already in place before each change are grandfathered. The stronger the blue, the more valuable the concession.
Plug-in hybrids (PHEVs) stopped qualifying for the exemption from 1 April 2025 — with a carve-out where the PHEV was available for use before that date under a financially binding commitment to keep providing it. The 2027 and 2029 changes were announced on 5 May 2026 following Treasury's statutory review; detail can be refined in enabling law, so treat them as announced changes. Existing leases entered before a change are grandfathered. This is general information about the tax rules, not personal tax advice — confirm your position with a registered tax agent.
Same car, two ways to pay — and the tax treatment is the difference.
For an eligible EV under the fuel-efficient LCT threshold, a novated lease is funded from pre-tax salary with no FBT payable while the exemption applies. A standard car loan is repaid from post-tax income and carries no such concession. That's why leasing an eligible EV is materially cheaper than a loan for many salaried employees — the benefit grows with your marginal tax rate.
Repaid from post-tax income
You earn, you're taxed, then you repay the loan from what's left. No FBT concession applies. Green/EV car loans are typically around 0.50%–1.00% p.a. below a lender's standard secured car-loan rate (some up to ~1.5%), and you own the car outright.
Funded from pre-tax salary
Because the eligible EV is FBT-exempt, the car and its running costs can be packaged from pre-tax salary — reducing taxable income. The saving depends on your salary, marginal rate and the car's price, and it steps down as the exemption phases out from 2027.
Illustrative concept only — bars show how funding source differs, not a dollar figure or scaled saving. Actual outcomes depend on your salary, marginal tax rate, the vehicle price (must be below the fuel-efficient LCT threshold), lease terms and your employer offering novated leasing. A comparison rate combines the interest rate with most fees into one figure and is usually higher than the advertised rate. We arrange car-loan finance across our panel; novated-lease salary-packaging is set up with your employer or a novated-lease provider. This is general information, not personal tax or credit advice.
The exemption is narrow. Three tests decide it.
Zero / low-emissions only
Battery-electric and hydrogen fuel-cell vehicles qualify. Plug-in hybrids stopped qualifying from 1 April 2025 (with a binding-commitment carve-out for pre-existing arrangements). Conventional hybrids and petrol cars never qualified.
Under the LCT threshold
The car's first-retail value must be below the fuel-efficient Luxury Car Tax threshold — $91,661 for 2026–27 — and LCT must never have been payable on it. Battery-electrics (0 L/100km) always meet the fuel-efficient test.
First held from 1 Jul 2022
The vehicle must have been first held and used on or after 1 July 2022 and provided to a current employee or their associates. It's an FBT concession, so it runs through employment — typically a novated lease.
Electric is going mainstream — one in eight new cars in 2025.
Combined electric-vehicle share of new-car sales has climbed steadily, and 2026 has accelerated it further. That's why lenders now compete on EV-specific finance.
Combined EV (BEV + PHEV) share of new-car sales: 9.6% in 2024 rising to 13.1% in 2025 (Electric Vehicle Council); 16.4% in April 2026 (FCAI VFACTS via WhichCar). Within the 2025 figure, battery-electric vehicles alone were 8.3% (103,269 BEVs — the first year past 100,000). Battery-electric share hit a record ~20% in May 2026. Monthly 2026 figures are FCAI VFACTS as reported by motoring media.
How the wind-back affects a novated EV lease.
The timing of when a lease starts matters, because each step is grandfathered. That's a genuine reason some people act while the full exemption still applies — presented as fact, not pressure.
No change. Eligible BEV/FCEV under the fuel-efficient LCT threshold ($91,661 for 2026–27) stay fully FBT-exempt, and a novated lease can be packaged with no FBT payable.
Full exemption survives only for eligible EVs valued at $75,000 or less. EVs above $75,000 but below the LCT threshold move to a 25% FBT discount — dearer EVs lose the full concession first.
The full exemption ends. All eligible EVs below the LCT threshold receive only a 25% FBT discount. The advantage shrinks but doesn't vanish — and leases already running are grandfathered.
A note on tax, and on rates
The FBT exemption and novated-lease treatment is complex tax law. Everything here is general information to help you understand your options — it is not personal tax advice, and we recommend you confirm your position with a registered tax agent or accountant before committing.
On finance: as a broker across a panel of 50 lenders, we can't promise you'll qualify for the lowest advertised or green-EV rate. Any rate depends on your credit profile, the vehicle, the term and the lender's assessment. Rates shown are indicative only, carry an as-of date, and move over time — a comparison rate (interest plus most fees) gives the truer cost.
Sources cited inline: ATO (Electric cars exemption; LCT thresholds; FBT on PHEVs); Treasury statutory review / joint ministerial release (announced 5 May 2026, reported by PwC and BDO); Electric Vehicle Council and FCAI VFACTS (EV sales share); ASIC MoneySmart (comparison rate). Figures as-of dates as marked. Not an offer of credit.
EV finance, answered straight.
Is the EV FBT exemption still available in 2026?
Yes. As at July 2026 the electric-car FBT exemption is still fully in place for eligible zero and low-emissions vehicles — battery-electric or hydrogen fuel-cell cars, first held and used on or after 1 July 2022, provided to a current employee, and with a first-retail value below the fuel-efficient Luxury Car Tax threshold ($91,661 for 2026–27). The Government has announced a phased wind-back starting 1 April 2027, but nothing changes before then. This is general information, not personal tax advice.
What's changing with the EV FBT exemption from 2027?
Following Treasury's statutory review, the Government announced on 5 May 2026 a two-step wind-back. From 1 April 2027 to 31 March 2029 the full exemption applies only to eligible EVs valued at $75,000 or less, while eligible EVs above $75,000 but below the LCT threshold get a 25% FBT discount. From 1 April 2029 the full exemption ends and all eligible EVs receive only a 25% discount. Leases entered before a change are grandfathered. Detail can be refined in enabling law, so treat these as announced changes.
Do plug-in hybrids (PHEVs) still qualify?
No. From 1 April 2025 a plug-in hybrid is no longer treated as a zero or low-emissions vehicle for FBT and is not eligible for the electric-car exemption. There is a carve-out: if the PHEV was used, or available for use, before 1 April 2025 and there's a financially binding commitment to keep providing it, the exemption can continue for that vehicle.
Is a novated lease cheaper than a car loan for an EV?
For an eligible EV under the fuel-efficient LCT threshold, a novated lease is funded from pre-tax salary with no FBT payable while the exemption applies, which can make it materially cheaper than a car loan repaid from post-tax income — especially at higher marginal tax rates. A car loan, by contrast, leaves you owning the vehicle outright with no residual to refinance. The right answer depends on your circumstances; we can compare car-loan options, and salary packaging is arranged through your employer or a novated-lease provider.
What is a green car loan and how much cheaper is it?
A green or EV car loan offers a discounted interest rate for eligible electric (and sometimes low-emissions) vehicles — indicatively around 0.50% to 1.00% p.a. below the same lender's standard secured car-loan rate, and occasionally more. The discount usually applies for the life of the loan, and some lenders waive fees or add perks. Rates are indicative only, vary by lender and credit profile, and move over time; always check the comparison rate.
Can I finance an EV that costs more than $91,661?
Yes — we can arrange finance for EVs of any value across our panel. But the FBT exemption only applies to eligible EVs below the fuel-efficient LCT threshold ($91,661 for 2026–27). Above that threshold the FBT concession doesn't apply, so a straightforward car loan often makes more sense. We'll talk through the trade-off for your specific vehicle and budget.
Thinking about an EV? Let's map the finance around the tax rules.
Tell us the vehicle, your budget and whether an employer novated lease is on the table — we'll compare car-loan options across our panel and flag where the FBT exemption changes the maths. No credit check to start.
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