Australia's FBT exemption can save you over $18,000 on an eligible electric vehicle. Here's everything you need to know — and every car that qualifies.
The Australian Government's Electric Car Discount removes Fringe Benefits Tax (FBT) on eligible EVs — one of the most powerful tax incentives available to Australian employees.
Fringe Benefits Tax is charged to employers when they provide non-cash benefits to employees — including a car through a novated lease. The FBT rate is 47% applied to 20% of the car's value annually. On a $65,000 car, that's over $6,100 per year.
47% FBT rate · Statutory formulaFor eligible electric vehicles, the entire FBT liability is reduced to zero. This means all lease payments and running costs — registration, insurance, servicing, charging — can be paid from pre-tax salary through a novated lease, saving you at your marginal tax rate.
FBT = $0 on eligible BEVsYou don't need to own the car outright. A novated lease lets you use pre-tax income to cover both the car and running costs. Combined with zero FBT, this is where the biggest savings are unlocked — often $10,000–$18,000 over a 5-year term.
Pre-tax lease · Full running cost inclusionPlug-in hybrid electric vehicles lost their FBT exemption status on 1 April 2025. PHEVs in binding arrangements before that date may still be covered under transitional rules, but any new PHEV arrangement attracts full FBT.
PHEVs no longer eligibleFrom 1 July 2025, standard hybrid vehicles using less than 3.5L/100km and priced under $91,387 became exempt from the Luxury Car Tax. This is a separate (smaller) benefit — hybrids do not qualify for the FBT exemption.
LCT exempt if <3.5L/100km · From July 2025
Indicative estimate only. Actual savings depend on lease term, km driven, and running costs. Seek professional advice.
All three conditions must be met for a vehicle to qualify for the FBT exemption. Miss one, and you pay full FBT.
Must be a Battery Electric Vehicle (BEV) or Hydrogen Fuel Cell Electric Vehicle (FCEV). Standard hybrids and PHEVs do not qualify for FBT purposes.
BEV ✓ FCEV ✓ PHEV ✗The vehicle must have been first held and used on or after 1 July 2022. Some second-hand EVs may qualify if first used after that date.
From 1 July 2022The GST-inclusive value at first retail sale must not exceed $91,387 (the LCT threshold for fuel-efficient vehicles in 2025–26). This is based on the first retail price, not your negotiated price.
Under $91,387The exemption applies when the vehicle is provided as a fringe benefit — typically through a novated lease. Outright personal purchases don't attract FBT, so the exemption doesn't apply.
Novated lease requiredHome charging electricity costs can be claimed using the ATO's EV home charging rate. Commercial charging station costs can also be included where records are kept.
Charging costs exemptEven though FBT is zero, the exempt amount must still be reported on your Payment Summary. This can affect means-tested benefits like HECS repayments, Medicare levy surcharge, and child support.
Reportable — seek adviceEvery vehicle listed below qualifies for the EV FBT exemption — full BEVs under the $91,387 LCT threshold. Prices are indicative drive-away as at May 2026; always verify with your dealer before committing.
In December 2025, the government announced a formal review of the Electric Car Discount. The exemption is fully in force for now — but change is expected by 2027. Acting sooner locks in the current benefit for your full lease term.
