Electric Car FBT Exemption in Australia: The Thresholds and the 2027 Changes
Three different dollar thresholds decide what an electric vehicle is actually worth to you, and none of them is the same number. What the FBT exemption covers, which cars qualify, what the announced changes do from April 2027, and the charging deduction most buyers never claim.
The short answer
The FBT electric cars exemption applies to battery electric and hydrogen fuel cell vehicles designed to carry a load under one tonne and fewer than 9 passengers, valued below the luxury car tax threshold for fuel-efficient vehicles, on which LCT has never been payable, and first held and used on or after 1 July 2022. Plug-in hybrids ceased to qualify from 1 April 2025. Three separate thresholds decide what the car is worth to you: $69,883 caps depreciation for the 2026 to 2027 income year, $91,661 is the LCT fuel-efficient threshold governing eligibility, and an announced $75,000 threshold would apply to the concession from April 2027. The ATO states that measure is not yet law and that existing leases will not be impacted. The exemption is also still a reportable fringe benefit, and there is a separate 4.20 cents per kilometre rate for home charging.
What the FBT exemption covers, and what it does not
The electric cars exemption is the largest single tax feature in EV finance and it is narrower than the sales pitch.
To qualify, the car must be a battery electric vehicle or a hydrogen fuel cell electric vehicle, designed to carry a load of less than one tonne and fewer than nine passengers. Its value must be below the LCT threshold for fuel-efficient vehicles at the first retail sale and any subsequent sale, and LCT must never have been payable on the importation or sale of the car. It must have been first held and used on or after 1 July 2022.
Plug-in hybrids are out. From 1 April 2025 a plug-in hybrid is not treated as a zero or low emissions vehicle for this exemption, though certain conditions allow continued application in specific cases. If somebody is selling you a PHEV on the strength of the EV FBT exemption, check that carefully with your accountant.
And the part that catches employees. The benefit is exempt from FBT, but it is still a reportable fringe benefit. The employer must calculate and report the notional taxable value. That reported amount is not taxed as income, and it does appear on your income statement, where it can affect income-tested obligations and entitlements. Nobody selling a novated lease leads with this. Ask your accountant what it does to your particular position before you sign.
The three thresholds that decide what it is worth
This is the part almost nobody sets out properly, because three different dollar figures are all loosely described as the EV tax break and they do entirely different things.
| Threshold | Amount | What it actually governs |
|---|---|---|
| Car limit, 2026 to 2027 income year | $69,883 | The maximum cost you can use to work out depreciation on a passenger vehicle. Cost above it is not deductible under any other rule |
| Announced FBT full-exemption cap, from April 2027 | $75,000 | Announced, not yet law. Above this figure the FBT concession is reduced rather than removed |
| Luxury car tax threshold, fuel-efficient vehicles, 2026 to 2027 | $91,661 | The eligibility ceiling for the FBT electric cars exemption. LCT must never have been payable on the car |
Read them together and a gap appears that catches business buyers out. An EV at $85,000 sits comfortably under the LCT fuel-efficient threshold, so it can qualify for the FBT exemption today. The same car is well above the car limit, so a business buying it outright can only use $69,883 to calculate depreciation. On an $85,000 purchase that leaves $15,117 of cost that never becomes a deduction at all.
The FBT exemption reaches to $91,661. Depreciation stops at $69,883. Both are real, both are current, and they are not the same tax break.
Which threshold matters depends entirely on how the vehicle is financed and who is claiming what. That is a question for your accountant before you choose the structure, not after. Our guide to the car limit and commercial vehicles covers how a vehicle escapes it altogether by carrying a payload of one tonne or more, which is not usually an option on a passenger EV.
What changes from April 2027
A statutory review of the electric car discount was commissioned in December 2025, and changes have since been announced. The ATO sets out a three-phase approach.
| Period | Treatment |
|---|---|
| Until the end of March 2027 | The existing electric car discount continues in full |
| April 2027 to April 2029 | EVs at $75,000 or below receive a 100 per cent discount on FBT, implemented through a 0 per cent rate. EVs above $75,000 but below the LCT threshold receive a 25 per cent discount on their payable FBT |
| From April 2029 | All electric cars below the LCT threshold receive the 25 per cent discount on their payable FBT |
Two qualifications, both from the ATO and both important. The ATO states this measure is not yet law. And it states that existing leases will not be impacted by these changes.
What that means practically, without overstating a measure that has not passed. If the announced schedule is legislated as described, the full exemption continues until the end of March 2027, after which a $75,000 line appears that does not exist today, and from April 2029 the full exemption gives way to a 25 per cent discount for everything below the LCT threshold.
The grandfathering point is the one to get in writing. The announcement indicates existing leases are protected. What that means for variations, extensions or refinances of an existing arrangement is exactly the sort of detail that gets settled when legislation is released, not before. If you are relying on grandfathering, your accountant needs to confirm the position once the legislation is available rather than on the strength of an announcement.
Treat any timetable for an unlegislated measure as a plan rather than a fact. It is still better information than a fuel price, because it is the variable that runs for the life of your contract.
Working out whether an EV stacks up on your numbers?
The finance structure and the tax treatment interact, and getting them in the wrong order costs more than the rate does. Bring us the vehicle, the price and how it will be used, and we will map the structures available and what each needs from your accountant. Our licence is ACL 390611, searchable on ASIC’s professional registers. What we charge you: nothing, on any loan type.
Where the structure decision sits
Three structures are available depending on who you are: a novated lease if you are an employee with a participating employer, a chattel mortgage if a business is buying the vehicle outright, and an ordinary consumer car loan for a private purchase with no business use. Which one suits is a longer conversation than this page should have, and we have already written it properly elsewhere.
Our electric vehicle finance page works through how you hold the car and what each option costs, and our guide to chattel mortgage versus novated lease for business vehicles covers that comparison in depth.
The one point worth making here, because it belongs with the thresholds above rather than with the structures: the order people approach this in is usually backwards. The structure determines the tax outcome for the life of the vehicle, and the thresholds on this page determine what that structure is worth. The rate determines a smaller number than either. Settle the structure and the tax treatment with your accountant, then shop the finance.
What to check before you sign
Specific to EVs, on top of everything that applies to any vehicle finance.
| Check | Why it matters |
|---|---|
| Is it a battery electric or hydrogen fuel cell vehicle, not a plug-in hybrid? | PHEVs ceased to be treated as zero or low emissions vehicles for the exemption from 1 April 2025 |
| Has LCT ever been payable on this car, including on a previous sale? | The exemption requires that LCT has never been payable on the importation or sale of the car |
| Where does the drive-away price sit against $69,883, $75,000 and $91,661? | Different thresholds govern depreciation, the announced future concession, and eligibility |
| What is the residual or balloon, and what is the plan for it? | EV resale values are less established than for combustion vehicles, which makes a large residual a bigger bet |
| What does the reportable fringe benefit do to my position? | The benefit is FBT-exempt and still reportable, and that figure appears on your income statement |
| If I am relying on grandfathering, what exactly is protected? | The measure is not yet law, and the treatment of variations and extensions is unresolved |
| What happens to a novated lease if I change jobs? | The arrangement is tied to the employer, and portability is a contract question worth answering before signing |
On the running cost side, do the sum on your own kilometres and your own electricity tariff rather than on a brochure figure. Charging at home overnight on a controlled load tariff and charging on the road at a commercial fast charger produce very different numbers, and the second is a great deal closer to petrol than most comparisons assume.
Why EV interest rose, and why that is not the reason to decide
Worth establishing the facts, because this subject attracts round numbers that nobody can source.
ACCC fuel price monitoring recorded daily average retail petrol across the five largest cities at 219.7 cents per litre on 11 March 2026, an increase of 48.8 cents from 20 February. By 31 March the five-city average had reached 257.2 cents per litre, with the eight capital cities averaging 254.4 cents. The ACCC did not characterise those levels as records, and the most recent weekly monitoring update reports average retail petrol and diesel prices slightly decreased across most locations.
On the demand side, the Federal Chamber of Automotive Industries reported 15,839 battery electric vehicles sold in March 2026, being 14.6 per cent of total sales against 7.5 per cent in March 2025. FCAI Chief Executive Tony Weber attributed part of that to disruption to fuel supply caused by conflict in the Middle East, along with the review into the fringe benefits tax concession for EVs. He also added the qualifier that most coverage dropped.
“It is too early to determine whether this represents a structural shift in the market.” Tony Weber, Federal Chamber of Automotive Industries.
That is the industry body declining to draw the conclusion a great deal of marketing has drawn on its behalf, and it is the right way to read a fuel spike. Fuel costs are a flow: they move weekly and they have already moved back. A finance contract is a stock, running three to five years or more, expensive to exit, with its economics fixed at signing. Matching a multi-year commitment to a six-week price movement is the wrong shape of decision. The thresholds above do not move weekly, which is why they are the better basis for one.
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Frequently Asked
Electric Vehicle Finance FAQs
What buyers ask before choosing a structure.
Is the FBT exemption on electric cars ending?
Changing rather than ending, on an announced schedule that is not yet law. The ATO sets out three phases: the existing discount continues in full until the end of March 2027; from April 2027 to April 2029 EVs at $75,000 or below receive a 100 per cent discount through a 0 per cent rate while those above $75,000 but below the LCT threshold receive a 25 per cent discount on payable FBT; and from April 2029 all electric cars below the LCT threshold receive the 25 per cent discount. The ATO states the measure is not yet law and that existing leases will not be impacted.
Which cars qualify for the electric cars FBT exemption?
A battery electric vehicle or hydrogen fuel cell electric vehicle, being a car designed to carry a load of less than one tonne and fewer than 9 passengers. Its value must be below the LCT threshold for fuel-efficient vehicles at the first retail sale and any subsequent sale, LCT must never have been payable on the importation or sale of the car, and it must have been first held and used on or after 1 July 2022. Confirm eligibility for a specific vehicle with your accountant rather than relying on a dealer’s assurance.
Do plug-in hybrids still get the FBT exemption?
Generally no. From 1 April 2025 a plug-in hybrid electric vehicle is not considered a zero or low emissions vehicle for the purposes of the exemption, although certain conditions allow the exemption to continue to apply in specific cases. If a PHEV is being sold to you partly on the basis of the EV FBT exemption, that is worth checking with your accountant before you commit.
What is the luxury car tax threshold for electric vehicles?
For the 2026 to 2027 financial year the LCT threshold for fuel-efficient vehicles is $91,661, against $80,809 for other vehicles. That fuel-efficient threshold is the eligibility ceiling for the FBT electric cars exemption. It is a separate figure from the car limit, which is $69,883 for the same year and caps the cost used to calculate depreciation, and separate again from the announced $75,000 threshold that would apply to the FBT concession from April 2027.
If my EV is FBT exempt, does anything still show up on my income statement?
Yes. Although the benefit is exempt from FBT, it remains a reportable fringe benefit, and the employer must calculate and report the notional taxable value. The reported amount is not taxed as income but does appear on your income statement, where it can be relevant to income-tested obligations and entitlements. Ask your accountant what that means for your particular circumstances before entering a novated lease.
Did the fuel price spike really drive EV sales?
It contributed, on the industry’s own account, and the industry also cautions against over-reading it. The FCAI reported battery electric vehicles at 14.6 per cent of new sales in March 2026 against 7.5 per cent a year earlier, with Chief Executive Tony Weber attributing part of the interest to disruption to fuel supply caused by conflict in the Middle East along with the review into the fringe benefits tax concession. He also said it is too early to determine whether this represents a structural shift in the market. Prices have since eased, which is the risk in treating a fuel spike as a reason to enter a multi-year contract.
Can I claim the cost of charging an EV at home?
There is a shortcut rate for it. ATO Practical Compliance Guideline PCG 2024/2 sets an electric vehicle home charging rate of 4.20 cents per kilometre, applying from 1 April 2022 for FBT and 1 July 2022 for income tax, for use where home charging costs cannot be separated from household electricity. Employers need odometer readings for the FBT year, and logbooks if using the operating cost method. Individuals need a valid logbook to use the logbook method plus one electricity bill for their residential premises. Note the rule that catches people: where the home charging percentage cannot be accurately determined and you also charge at commercial stations, you must either apply the rate and disregard the commercial charging costs, or claim the actual commercial costs and abandon the rate. You cannot do both. Confirm your position with your accountant.
Are EV resale values a risk on a balloon or residual?
Worth treating carefully. A residual or balloon is a bet that the vehicle will be worth at least that amount at the end of the term, and the resale market for electric vehicles is less established than for combustion vehicles, with battery condition, model turnover and rapid technology change all affecting values. That does not mean avoid a residual. It means size it conservatively and have a plan for meeting it that does not depend on a particular resale outcome.
The bottom line
Three thresholds decide the tax outcome on an electric vehicle and they are all different numbers. $69,883 caps depreciation. $91,661 is the eligibility ceiling for the FBT exemption. An announced $75,000 line would apply to the concession from April 2027.
Read together, that produces the result most buyers never see. An $85,000 EV can be fully FBT exempt today while leaving $15,117 of cost permanently outside any depreciation claim. Both facts are current, both are real, and they are not the same tax break.
The concession itself is changing on an announced timetable that the ATO says is not yet law, with existing leases indicated to be protected and the detail of that protection still to be settled. If your decision depends on grandfathering, that is a question for your accountant once legislation is available, not a reason to sign now.
Two smaller things worth carrying. The exemption is still a reportable fringe benefit, so a figure appears on your income statement even though no FBT is paid. And there is a 4.20 cents per kilometre shortcut rate for home charging, with a rule that stops you combining it with actual commercial charging costs.
A fuel price spike is what brought most people to this question, and it is the weakest input in it. Fuel moves weekly and has already moved back. The thresholds run for the life of your contract. Settle the structure and the tax treatment with your accountant, then shop the finance, because the rate is the smallest of the numbers on this page and the one everybody shops first.
Joseph Sukkar
Joseph founded Intellect Finance in Penrith in 2005 and has worked in Australian finance for more than 25 years. Asset and vehicle finance is led by Chantelle, who handles vehicle, equipment and personal asset applications day to day. Intellect Finance charges clients no fee on any loan type. More about the team, or see our electric vehicle loan page.
Sources
Australian Taxation Office, Electric cars exemption, last updated 1 April 2026, for the conditions of the FBT electric cars exemption including that the car must be a battery electric or hydrogen fuel cell electric vehicle designed to carry a load of less than one tonne and fewer than 9 passengers, that its value must be below the LCT threshold for fuel-efficient vehicles at the first retail sale and any subsequent sale with LCT never having been payable, that it must be first held and used on or after 1 July 2022, that from 1 April 2025 a plug-in hybrid is not considered a zero or low emissions vehicle subject to certain conditions, and that the benefit remains a reportable fringe benefit for which the employer must calculate and report the notional taxable value. ato.gov.au
Australian Taxation Office, Electric car discount: more sustainable fringe benefits tax treatment of electric cars, last updated 14 May 2026, for the three-phase approach under which the existing discount continues in full until the end of March 2027, EVs at $75,000 or below receive a 100 per cent discount on FBT through a 0 per cent rate and those above $75,000 but below the LCT threshold receive a 25 per cent discount from April 2027 to April 2029, all electric cars below the LCT threshold receive the 25 per cent discount from April 2029, together with the statements that this measure is not yet law and that existing leases will not be impacted by the changes. ato.gov.au
Australian Taxation Office, Car thresholds from 1 July, published 9 June 2026, for the car limit of $69,883 for the 2026 to 2027 income year and the luxury car tax thresholds of $91,661 for fuel-efficient vehicles and $80,809 for other vehicles. ato.gov.au
Australian Taxation Office, Practical Compliance Guideline PCG 2024/2, for the electric vehicle home charging rate of 4.20 cents per kilometre applying from 1 April 2022 for FBT and 1 July 2022 for income tax where home charging costs cannot be separated from household electricity, the record-keeping requirements for employers and individuals, and the rule that where the home charging percentage cannot be accurately determined and commercial charging occurs the taxpayer must either apply the rate and disregard commercial charging costs or claim actual commercial costs and abandon the rate. ato.gov.au
Treasury, Statutory review of the electric car discount, for the review of the operation of the electric car discount commissioned under the Treasury Laws Amendment (Electric Car Discount) Act 2022, with terms of reference released in December 2025. treasury.gov.au
ACCC, Weekly fuel price monitoring reports, for daily average retail petrol prices across the five largest cities of 219.7 cents per litre on 11 March 2026, an increase of 48.8 cents from 20 February, and 257.2 cents per litre in the week ending 31 March 2026 with an eight capital cities average of 254.4 cents, and for the most recent update reporting that average retail petrol and diesel prices slightly decreased across most locations. accc.gov.au
Federal Chamber of Automotive Industries, for battery electric vehicle sales of 15,839 units in March 2026 representing 14.6 per cent of total sales against 7.5 per cent in March 2025, and for the statements by Chief Executive Tony Weber attributing increased consideration of EVs to disruption to fuel supply caused by conflict in the Middle East along with the review into the fringe benefits tax concession, and that it is too early to determine whether this represents a structural shift in the market. fcai.com.au
Important disclosures, general advice warning and licensing
General information only. This article is general information only and does not constitute financial, credit, legal or tax advice. It does not take your personal or business circumstances into account. Before acting on any information here, consider whether it is appropriate to your objectives, financial situation and needs.
Tax content, and the limits of it. References to the FBT electric cars exemption, the car limit, luxury car tax thresholds, depreciation, GST credits and deductibility are general descriptions of how the rules typically apply. Thresholds cited are those published by the ATO for the 2026 to 2027 year and reviewed on 11 September 2026. Whether any particular vehicle qualifies, and what any structure means for your position, depends on your circumstances and on current ATO rulings. Intellect Finance is a finance broker and does not provide tax advice. Confirm everything on this page with your registered tax agent or accountant before you commit to a vehicle or a structure.
The announced changes are not law. The three-phase approach to the FBT treatment of electric cars described on this page was announced and is set out by the ATO, which states that the measure is not yet law. Announced measures can change or fail to pass. The indication that existing leases will not be impacted is an announcement rather than enacted grandfathering, and the treatment of variations, extensions and refinances of existing arrangements is not settled. Do not enter, vary or extend an arrangement in reliance on an unlegislated measure without advice from your accountant based on the legislation as passed.
About the fuel price and sales figures. Petrol price figures are drawn from ACCC weekly fuel price monitoring for the dates stated and describe past movements only. Nothing on this page predicts the future direction of fuel prices, electricity prices, vehicle prices or resale values. Vehicle sales figures are as reported by the FCAI for the month stated. Neither is a basis for a purchase decision on its own.
The home charging rate is a compliance shortcut, not a general entitlement. PCG 2024/2 sets out when the 4.20 cents per kilometre rate may be applied and what records are required. Whether it is available to you, and whether it produces a better result than claiming actual costs, depends on your circumstances and record keeping. Confirm with your registered tax agent or accountant.
Running costs vary widely. Comparisons between electric and combustion running costs depend on your kilometres, your electricity tariff, where and when you charge, and the vehicles compared. Home charging on a controlled load tariff and commercial fast charging produce materially different results. Do the calculation on your own figures rather than on a published example.
Lender policies vary and change. Available structures, acceptable vehicles and ages, residual and balloon policy, maximum terms, documentation and credit policy differ between lenders and financiers, are subject to each lender’s own assessment, and change without notice. Novated leasing arrangements also depend on your employer’s participation and their chosen provider. This page names no lenders and publishes no interest rates. No broker can guarantee loan approval, a particular interest rate, or a timeframe.
Regulatory framework. A consumer car loan for private use is regulated consumer credit, so responsible lending obligations apply and Best Interests Duty applies to a broker providing credit assistance on it. Vehicle finance taken predominantly for business purposes sits outside the National Credit Code and neither applies. Whether particular credit is regulated depends on the facts.
What we charge you. Nothing, on any loan type. No arrangement fee for residential, commercial, corporate, asset, SMSF or personal lending, no fee for complex or specialist lending, and no clawback recovery fee if a loan is discharged early. Lenders pay us a commission on settlement, disclosed to you in writing in our Credit Guide before we provide credit assistance. This statement describes Intellect Finance only, and other brokers’ arrangements are set out in their own Credit Guides.
About the reviews shown. The reviews displayed on this page are genuine reviews published by clients on Intellect Finance’s Google Business Profile, shown live via a third-party reviews widget. They reflect those individuals’ own experiences and are not a promise of any particular outcome.
Other professionals. Tax questions, FBT, novated lease packaging and eligibility to your accountant or registered tax agent. Contracts, leases and security documents to your solicitor. If you are having difficulty meeting repayments, contact your lender’s hardship team, and free independent help is available from the National Debt Helpline on 1800 007 007.
Intellect Finance Pty Ltd holds Australian Credit Licence 390611 and is a member of the MFAA and AFCA. Lending criteria, fees and terms apply. All applications are subject to lender assessment and approval. Article checked 11 September 2026.
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General information only, and not tax advice. The announced FBT changes are not yet law. Confirm eligibility and treatment with your accountant.