If you’ve looked into an EV novated lease in Australia, you’ve probably heard this.
“EVs are FBT-exempt, so the tax saving is huge.”
True — it really was. But now the question has to change. Not “do EVs save tax?” but “how long does that saving last?”
Because the Australian government has decided to wind the EV FBT exemption back in phases. It isn’t vanishing today, but from April 2027 the conditions narrow, and from April 2029 the full exemption effectively ends.
The bottom line
- Now to 31 March 2027: the existing EV FBT full exemption continues
- April 2027 to March 2029: EVs of $75,000 or less stay fully exempt; pricier EVs under the LCT threshold get a 25% discount only
- From April 2029: all EVs below the LCT threshold move to a 25% discount (full exemption ends)
- Existing leases are protected (grandfathered) — a lease signed before the change keeps its terms for the duration
- The point isn’t “buy an EV” — it’s that, for a car you need, when you sign changes the tax result
Why it looks like a ‘time bomb’
The EV FBT exemption was a strong incentive to lift EV uptake. In a novated lease, exempting the EV from FBT let you package the car cost out of pre-tax salary — a big saving.
The problem is it worked too well. EV lease demand surged, and the budget cost grew far beyond first forecasts. So on 5 May 2026, on the findings of Treasury’s statutory review, the government announced not “we’ll scrap it” but “we’ll narrow it toward cheaper EVs.”
In other words, this isn’t a benefit shrinking because it failed. It’s closer to a benefit being retargeted because it was used so heavily.
The EV FBT exemption, in three phases
| Period | How it applies | Meaning |
|---|---|---|
| Now – 31 March 2027 | Existing full FBT exemption continues | Eligible EVs keep the current structure |
| April 2027 – March 2029 | Full exemption for ≤$75,000 / above that but under LCT → 25% discount | Pricier-EV benefit cut |
| From April 2029 | All EVs under the LCT threshold get a 25% discount | Full exemption ends; permanent discount |
Two numbers matter here.
First, $75,000. From April 2027 this becomes the effective new line for the full exemption.
Second, the fuel-efficient LCT threshold. For 2025-26 that’s $91,387. Only EVs under this threshold are in the scheme at all; above it, there’s no exemption to begin with.
Grandfathering — what signing now really means
The most important word in this change is grandfathering. Put simply, a lease entered before the rules change keeps its existing terms for the duration of that lease — and the government confirmed this in its announcement.
Why does it matter? EV novated leases usually run 3 or 5 years. Sign on the full-exemption terms before the change, and even when the rules shift in 2027, your contract keeps its tax structure for the whole term.
So 31 March 2027 isn’t just a date. It can be the last point to lock in the full exemption for your lease term.
There’s a caveat, of course. What counts as “signed” — the quote, the lease approval, vehicle delivery, or the actual novation date — varies by provider and contract. With a benefit this large, don’t gloss over the document definition at the final step.
Who should move now
Not everyone needs to rush. But if the below fits, there’s reason to run the numbers.
① Migrant business owners with a Pty Ltd + PAYG salary. A novated lease is fundamentally salary packaging. A pure sole trader generally can’t; a Pty Ltd paying yourself a PAYG salary can be considered. The mechanism itself is covered in detail in the earlier piece → Self-employed and think you can’t novate? — the EV tax-saving. This article focuses less on how you save and more on how long that saving is available.
② Anyone eyeing an EV over $75,000. The biggest difference shows up in this band. Say you’re looking at an $80,000 EV. Right now, if eligible, it can be fully exempt — but after April 2027 it’s over $75,000, so it’s a 25% discount only. Under $75,000, the full exemption holds for a while yet.
③ Anyone already planning to change cars. This is the key part. Buying a car you don’t need for the tax break isn’t tax-saving — it’s just spending. But if you were going to change cars within a year or two anyway, an EV suits your life and charging, and you have the PAYG structure — then whether you sign that “car you’d buy anyway” before March 2027 can make a real money difference.
Still — don’t treat an EV like a ‘closing-down sale’
A smaller tax break doesn’t erase an EV’s economics. After 2027, EVs of $75,000 or less stay fully exempt, and after 2029 a 25% FBT discount remains. Running costs, depreciation, insurance, charging, and range still matter.
And being eligible for the full exemption now doesn’t mean you should buy an expensive EV. The tax trap is always the same — the moment you spend more to save tax, the maths flips. Good tax-saving makes spending you already need more efficient; it doesn’t manufacture spending for the break.
Pre-signing checklist
- Can your structure do PAYG salary packaging?
- Is the vehicle a pure EV or hydrogen car?
- Is the price under the current LCT threshold ($91,387, 2025-26)?
- Is it under or over $75,000 on the post-2027 line?
- Is the lease 3 years or 5?
- Have you confirmed the “signed” basis (contract / approval / delivery) for grandfathering?
- Have you factored in insurance, tyres, charging, residual value, and used-EV price falls?
A car doesn’t run on the tax table. It runs in real life.
In closing
The EV FBT exemption isn’t over. But the door on the full exemption is slowly narrowing. The current structure holds until end-March 2027; from April 2027 a new $75,000 line appears; from April 2029 it becomes a 25% discount, not a full exemption.
So the question now isn’t “do EVs save tax?” but “which phase do my car and my signing date fall into?” The answer makes the same car a completely different number.
Read next
- Self-employed and think you can’t novate? — the EV tax-saving · What changes from 1 July 2026 · The Korea–Australia money map
Disclosure: The author writes general information from a background in Australian accounting and fintech. This is not a recommendation of any particular novated-lease company, vehicle brand, or financial product.
Disclaimer: This is general information, not tax or financial advice. FBT, the LCT threshold, vehicle eligibility, the “signed” date basis, and grandfathering can vary by timing and contract. Confirm with an accountant and a salary-packaging/novated-lease specialist before signing. Sources verified: Australian Government (Treasury; Climate Change & Energy) joint announcement of 5 May 2026, Treasury statutory review, and News.com.au reporting.