Electric vehicle FBT exemption

Since 1 July 2022, eligible zero or low emissions vehicles provided through salary packaging have been exempt from Fringe Benefits Tax. This means no ECM post-tax component — 100% of the lease cost can come from pre-tax salary.

Eligible vehicles include battery electric vehicles (BEVs) and hydrogen fuel cell electric vehicles (FCEVs) with a value below the fuel-efficient luxury car tax threshold ($91,387 for 2025–26).

A new $75,000 price cap is introduced for the full exemption on new arrangements. EVs at or below $75,000 retain full FBT exemption. Vehicles priced between $75,001 and the LCT threshold receive only a 25% FBT discount — requiring a post-tax ECM component for the first time on mid-range EVs.

The full exemption ends for all new arrangements. Eligible EVs below the LCT threshold receive a permanent 25% FBT discount. Vehicles above the LCT threshold remain fully FBT-applicable with no concession.

The Government has confirmed that existing novated leases are grandfathered. If your lease commenced before the relevant phase start date, the new rules do not apply for the life of that agreement — regardless of whether the lease ends after 2027 or 2029.

Plug-in hybrid electric vehicles (PHEVs) are no longer eligible for the exemption on new arrangements from 1 April 2025, unless a financially binding commitment was in place before that date.

• Lock in before 31 March 2027 to secure full exemption for the lease term
• PHEVs: assume standard FBT unless pre-April 2025 binding commitment exists
• Reportable Fringe Benefits Amount (RFBA) still applies even when FBT-exempt