The EV FBT Exemption Is Changing — Here's What You Need to Know
The Albanese Government is reshaping the EV FBT exemption into a 25% FBT discount. Find out what changes, what stays, and what it means for your novated lease.
If you've been considering a novated lease on an electric vehicle, the rules are shifting — and the timing matters. The Albanese Government has announced it will wind back the full FBT exemption that currently applies to eligible EVs, replacing it with a permanent 25% discount on FBT for these vehicles. The announcement, made on 4 May 2025, is framed as making the tax treatment 'fairer and more financially sustainable' as the Australian EV market matures.
The short version: the zero-FBT free ride that made EV novated leases exceptionally attractive is being phased out. But the government is not removing support entirely — a 25% FBT discount is a meaningful concession compared to what petrol and diesel drivers get (which is nothing). According to the Treasury Ministers release ([Source 1]), the changes will be introduced progressively through three phases, and existing leases won't be impacted.
What this means for novated lease customers
There are a few things worth separating out here, because industry commentary has already started muddying the waters.
If you already have an EV on a novated lease, the government has been explicit: existing leases are protected from the changes. You can hold your current arrangement without needing to act urgently based on that alone.
If you're thinking about getting into an EV novated lease, the calculus changes depending on timing and which phase the rules are in when your lease starts. The full exemption — where no FBT applies at all — is being transitioned out. What replaces it is a 25% FBT discount, which still reduces the taxable value of your vehicle benefit meaningfully, but it won't be as sharp as the current zero-FBT treatment. Qualitatively, EV novated leases will still offer real pre-tax advantages over buying outright or financing privately — but the gap between EVs and other vehicles narrows.
The government's stated rationale, per the Treasury Ministers release ([Source 1]), is that the New Vehicle Efficiency Standards have already driven a significant increase in affordable EV models available in Australia. In their view, the policy lever has done enough of its job to be recalibrated. Whether you agree with that read or not, it's the framework driving the legislative change.
Common questions
Does this affect my existing EV novated lease?
No. According to the government announcement, existing leases will not be impacted by the changes. If you're already in an EV novated lease, your current FBT treatment is protected.
What is the 25% FBT discount replacing the exemption?
Instead of paying zero FBT on an eligible EV, you'll pay FBT calculated on 75% of the vehicle's taxable value. It's less generous than the full exemption, but it still represents a real tax concession compared to no discount at all.
When do the changes take effect?
The changes are being introduced in three progressive phases. The budget estimates savings to government of $1.7 billion over five years from 2025–26, which gives a rough sense of the timeline. Specific phase dates should be confirmed against the final legislation — speak to us before signing anything new.
Are plug-in hybrids (PHEVs) affected?
The announcement focuses on electric vehicles. PHEVs have had a separate and more complex FBT history. Contact millarX directly for current PHEV treatment, as this is an area where detail matters.
Is an EV novated lease still worth it under the new rules?
A 25% FBT discount, combined with the pre-tax structuring of a novated lease, still delivers genuine tax advantages over most other ways of acquiring and running a vehicle. The benefit is smaller than before — but it's not gone. Use our calculator or talk to us for a personalised comparison.
Should I rush to sign a lease before the changes kick in?
Don't let urgency override good decision-making. The phase-in approach means not everything changes at once, and the right answer depends on your income, vehicle choice, and lease term. Get advice specific to your situation before acting.