Federal Budget 2026: Upcoming Adjustments to Electric Vehicle Tax Incentives

One of the most notable changes is the gradual reduction of the Fringe Benefits Tax (FBT) exemption for EVs purchased through novated leases. Introduced in 2022, this exemption allowed eligible EVs to be salary packaged without attracting FBT, substantially reducing running costs for many buyers. Industry estimates suggest that this policy has contributed to putting more than 100,000 EVs on Australian roads.

Under the new budget measures, the FBT exemption will be phased out as follows:

• From April 2027, EVs priced below $75,000 will remain exempt from FBT, while those above this threshold will be taxed at 75% of the standard rate.
• By April 2029, all EVs will be subject to the 75% FBT rate, except for luxury models, which will continue to attract the full FBT.

These changes are expected to save the government $1.7 billion over four years, following the scheme's cost ballooning to an estimated $1.35 billion this financial year, far exceeding the original $90 million forecast.

For consumers, particularly those considering EV purchases through salary packaging arrangements, it's crucial to be aware of these upcoming changes. While the immediate impact may be minimal, the gradual reduction of tax incentives could influence the overall affordability and attractiveness of EVs in the coming years.

As the EV market continues to evolve, staying informed about policy changes and exploring various financing options will be essential for consumers aiming to make cost-effective and environmentally conscious vehicle choices.