Bowen Confirms EV Tax Break Faces Mid-Year Budget Scrutiny

Federal Energy Minister Chris Bowen has confirmed that the federal government's electric car discount is being scrutinised ahead of the upcoming Mid-Year Economic and Fiscal Outlook (MYEFO) in December.

Speaking at the COP31 climate conference in Turkey, Bowen acknowledged that cabinet ministers and the expenditure review committee examine all major policies at every economic update to confirm they operate as planned. However, he pushed back against suggestions that the Commonwealth should abolish the discount outright, stating that now is not the time to walk away from electric vehicle incentives.

The review comes amid growing pressure from Treasury to rein in federal spending and assist the Reserve Bank in managing inflation. Treasury estimates that the fringe benefits tax (FBT) exemption for electric vehicles will cost approximately $1.35 billion this financial year, a figure significantly higher than initial forecasts due to record take-up by Australian drivers.

While the government is already progressing legislation to introduce tiered caps and a phased wind-down toward a 25 per cent concession from April 2027, the mid-year budget review process has sparked discussion over whether further fiscal curbs could be considered.

What this means for your novated lease

For Australian employees weighing up salary packaging an electric vehicle, the ongoing policy discussion highlights several important factors:

• Current rules remain active: The 100 per cent FBT exemption continues to apply for eligible battery electric vehicles priced under the luxury car tax limit of $91,387.
• Grandfathering protections: In previous updates and drafted legislative changes, the government has consistently maintained that existing binding lease agreements remain protected under the rules that were in place when the arrangement began.
• Timing is critical: While the minister rejected calls to scrap the scheme immediately, budget pressures mean transitional deadlines and price thresholds will remain under close examination. Locking in an arrangement early ensures you capitalise on current FBT-free terms before any tighter constraints take effect.
• Verify your vehicle price: If future phases introduce stricter rules or lower price caps, ensuring your selected car sits comfortably within current thresholds will protect your salary packaging savings over your full lease term.

This information is general commentary only and does not constitute financial, legal or tax advice. Speak to your employer or a qualified salary packaging advisor to see how novated leasing applies to your individual circumstances.