The Federal Government will begin winding back Australia’s electric vehicle (EV) Fringe Benefits Tax (FBT) exemption from 1 April 2027, reducing tax concessions for employer-provided EVs.
The FBT is a tax paid by employers when they provide non-cash benefits to employees, such as company vehicles, salary-packaged cars, gym memberships, or similar perks. Unlike many international tax systems where these benefits are taxed to the employee personally, Australia taxes the employer directly. FBT operates on a separate tax year running from 1 April to 31 March.
Under changes announced in the 2026-2027 Federal Budget, the current full FBT exemption for eligible EVs will gradually transition to a reduced concession model over two years. The move comes after EV uptake accelerated faster than expected since the exemption was introduced in 2022, with the cost to government revenue forecast to reach approximately $1.4 billion in 2025-2026.
Currently, eligible EVs provided through salary packaging or company-car arrangements are fully exempt from FBT where the vehicle remains below the luxury car tax threshold for fuel-efficient vehicles, currently $91,387 for the 2025-2026 financial year.
The government confirmed the existing rules will remain unchanged until 31 March 2027. From 1 April 2027, however, only EVs valued at $75,000 or less will continue to receive the full exemption. EVs valued between $75,001 and the luxury car tax threshold will instead move to a reduced concession structure, equivalent to an effective 25% FBT discount. From 1 April 2029, the full exemption will end entirely for all new eligible arrangements, with the reduced concession applying across the board.
The budget also includes transitional protection for existing arrangements. EV salary-packaging or novated lease arrangements entered before the relevant commencement dates will retain their current treatment for the life of the arrangement.
The changes will particularly affect multinational groups and foreign-owned subsidiaries that use higher-value EV salary-packaging arrangements as part of executive remuneration packages. An executive EV arrangement valued at around $90,000 that currently attracts no FBT liability could generate an annual FBT cost of approximately $5,000 to $7,000 under the new rules, depending on vehicle usage and structure.
Businesses considering premium EV salary-packaging arrangements now have a limited window before 1 April 2027 to secure the current exemption treatment. The changes will also increase the importance of documenting commencement dates and reviewing replacement-vehicle policies, as employers will generally treat replacement EVs entered after the deadline as new arrangements under the revised rules.
While the government has reduced the generosity of the concession, it has retained a long-term discounted treatment for eligible EVs, signalling continued support for electric vehicle adoption in Australia.
The changes will push employers to focus more heavily on early planning, cost modelling, and broader reviews of vehicle-benefit policies ahead of the April 2027 transition.
Last updated: 18th May 2026
About the Author
Aaron Garry is the Managing Director of ABN Australia, where he leads the firm’s strategic growth and client service delivery. A Chartered Accountant with deep local and international experience, Aaron has supported hundreds of global businesses in establishing and growing their presence in Australia. His expertise spans market entry, compliance, and commercial advisory.
Aaron Garry
Managing Director