Electric Vehicle FBT Exemption: Budget Changes

The 2026 Federal Budget has confirmed changes to the Fringe Benefits Tax (FBT) exemption currently available for eligible electric vehicles (EVs). While the exemption will not be retained in its current form indefinitely, the government has announced a phased transition to a reduced concession over several years.

These changes provide clarity and a defined timetable for businesses, employers and employees who currently access, or are considering, EV arrangements.

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Summary of the Announced Changes

Under the existing rules, eligible electric vehicles may be fully exempt from FBT. The Budget confirms that this full exemption will be progressively replaced with a permanent 25% discount on FBT payable.

It’s important to note there will be no changes to the FBT treatment of eligible electric vehicles for the FBT year ending 31 March 2027. Additionally, all existing arrangements may continue under the current rules during this period.

Key features of the announcement include:

• No change in the current FBT year

• Continued full exemption for lower-cost EVs for a limited period

• A permanent, reduced concession from 1 April 2029

• Phased Introduction of the new rules

  FBT applies on a year ending 31 March. The changes will apply as follows:

  FBT year 2026–27

  • No change

  • Full FBT exemption continues for all eligible EVs

  FBT years 2027–28 and 2028–29

  • Eligible EVs with a value of $75,000 or less → Full FBT exemption continues

  • Eligible EVs valued above $75,000 but below the Luxury Car Tax threshold → 25% discount on FBT payable

  FBT year 2029–30 onwards

  • All eligible EVs below the Luxury Car Tax threshold → 25% discount on FBT payable

  • The full FBT exemption will cease

  From 1 April 2029, the 25% discount will apply on an ongoing basis.

• Eligible Vehicles

  The Budget announcement does not change the eligibility criteria for the electric vehicle concession.

  To qualify, a vehicle must:

  • Be a battery electric vehicle or hydrogen fuel-cell electric vehicle

  • Be a passenger vehicle designed to carry:

    • A load of less than one tonne, and

    • Fewer than nine passengers

  • Be first held and used on or after 1 July 2022

  • Have a value at first retail sale below the Luxury Car Tax (LCT) threshold

  Plug-in hybrid electric vehicles are not treated as zero or low-emissions vehicles for FBT purposes, other than under limited transitional provisions that have now largely concluded.

• Luxury Car Tax Threshold

  For fuel-efficient vehicles:

  • The 2025–26 LCT threshold is $91,387

  • This threshold is reviewed annually and may increase over time

  Vehicles with a value above the LCT threshold are not eligible for the electric vehicle FBT concession.

• Important tariff treatment unchanged

  The Budget confirms that eligible electric vehicles will continue to be exempt from import tariffs on an ongoing basis. This aspect of the existing concession is not affected by the announced changes.

Practical implications

The staged reduction of the FBT exemption means that:

· Vehicle value will play a greater role in determining the level of concession available

· The FBT treatment of electric vehicles will differ depending on when the vehicle is acquired

· Arrangements entered into before and after 1 April 2029 may produce different outcomes

The application of these rules will depend on individual circumstances, including the type of vehicle, the timing of acquisition and how the vehicle is provided.

As your trusted advisors, we will work with you to optimise your position.

This information is general in nature and based on Budget announcements and factsheets. Final outcomes will depend on legislation yet to be passed.

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