Australia's EV tax discount is being wound back. Here's what it actually means

The federal government has announced a phased wind-back of the EV FBT exemption, the tax break that made novated lease EVs significantly more attractive over the past three years. It's not an immediate end, and it doesn't affect everyone equally. Here's what's actually changing, who it applies to, and whether the timing should factor into your next car decision.

What the FBT exemption actually was

Fringe Benefits Tax is the tax employers pay on non-cash benefits provided to employees, including cars. When the Albanese government introduced the exemption in 2022, it meant an EV provided through a novated lease was completely exempt from FBT, as long as the car sat below the luxury car tax threshold (currently $91,387).

The practical impact was significant. Under standard FBT rules, a $60,000 EV can generate around $11,700 in annual FBT liability for the employer once the statutory method and gross-up factor are applied. Across a three-year novated lease, removing that liability changed the effective cost of EV ownership by tens of thousands of dollars for salary packagers. That's the benefit being wound back.

What's changing and when

The wind-back operates in three phases:

Until 31 March 2027: nothing changes. The full FBT exemption stays in place for EVs below the LCT threshold. Anyone currently in a novated lease, or anyone who enters one before this date, is unaffected for the life of that agreement.

1 April 2027 to 31 March 2029: a split applies. EVs priced at $75,000 or below keep the full exemption. EVs between $75,001 and $91,387 move to a 25% FBT discount only.

From 1 April 2029: the full exemption ends. All EVs below the LCT threshold receive a 25% FBT discount. Nothing above that threshold receives any concession.

The grandfathering provision is meaningful: existing novated leases are fully protected under their current terms for the life of the original agreement. These changes only affect new arrangements entered from each phase date onward. One caveat: refinancing, extending, or materially altering an existing lease is likely to be treated as a new arrangement and will lose the protected status.

Who this actually affects

The FBT exemption only ever applied to employer-provided vehicles. If you bought an EV outright, through a standard car loan, or in any arrangement outside of salary packaging, the exemption never applied to you in the first place. This change doesn't affect your running costs.

The groups directly affected are:

Employees on novated leases. The financial maths changes at renewal, and for any new arrangements started after April 2027. The saving is reduced, not eliminated, at least through to 2029.

Employers running EV fleets. FBT liability increases from 2027 for any new EV additions to a fleet.

The used EV market, indirectly. This is the angle that hasn't received much attention. Novated leases are one of the main pipelines feeding used EVs into the Australian market. As off-lease and salary packaged vehicles cycle back in, they become the second-hand options that private buyers access at more accessible prices. If new novated lease EV uptake slows meaningfully from 2027 onward, the supply of well-maintained off-lease examples entering the used market will follow with a lag of two to three years.

Should you buy an EV now?

For salary packagers, the answer is straightforward. Entering a new novated lease arrangement before 31 March 2027 locks in the full exemption for the life of that lease under the grandfathering protections. If an EV was already on the radar, the deadline gives the decision a sharper edge.

For private buyers, the timing argument is actually just as strong, just coming from a different direction. The novated lease wave that the FBT exemption drove from 2022 onward is now cycling off-lease, which means the used EV market in Australia is better stocked than it has ever been. Prices have corrected from their post-COVID peak, the range of available models has broadened, and the charging network is substantially more developed than it was three years ago. Private buyers are the beneficiaries of the exemption era even if they never participated in it directly.

The honest answer to "should I buy now?" is that the conditions (policy, supply, price, and infrastructure) are more aligned than they've been at any previous point. Carma's car finance is same-day and won't affect your credit score just to check your options, which makes it easy to clarify your budget before you start narrowing down models.

What it means for used EV prices

The FBT exemption drove a significant wave of novated lease EV activity from 2022 onward. Those vehicles are cycling into the used market now, which explains why used EV supply has strengthened and prices have become more accessible over the past year.

If the exemption wind-back slows new novated lease starts from 2027, the downstream effect on used supply will begin to be felt from roughly 2029 to 2030, when the leases signed around the deadline would typically cycle off. It's not likely to collapse the used EV market, but it could soften the supply growth that has characterised the segment recently.

For buyers considering a used EV in the next two years, the current market timing is actually favourable: supply is healthy, prices have corrected from their post-COVID peak, and the vehicles coming off lease reflect mainstream EV adoption rather than early adopter edge cases.

The window is still open. Here's how to look at it.

The reporting on this change has skewed toward the headline number: the exemption ends. The detail is more measured. The full exemption is in place for another year. Existing leases are protected. Even from 2029, there's still a 25% discount for EVs under the LCT threshold.

What's changed is certainty. The exemption that shaped a lot of EV buying decisions since 2022 was always subject to policy review. Now there's a confirmed timeline, and the runway is finite.

The used EVs at Carma largely reflect what the novated lease wave produced: well-maintained, lower-kilometre examples coming off fleet and salary packaging arrangements at prices that make the technology accessible for the first time to buyers who weren't salary packaging. The window is still open. The deadline just made it easier to see.