The EV FBT Exemption Is Changing — Here's What It Means for You
The Albanese Government is reshaping the EV FBT exemption in three phases. Here's what PAYG employees with novated leases need to know right now.
If you've been considering a novated lease on an electric vehicle, you've probably heard about the FBT exemption that made EVs genuinely attractive for PAYG employees. That exemption is now changing. On 4 May 2025, the Albanese Government announced adjustments to the fringe benefits tax treatment of electric vehicles, describing them as "fairer and more financially sustainable" — according to the Treasury Ministers release.
The headline: the full FBT exemption is transitioning to a permanent 25 per cent discount on FBT for eligible EVs. The changes roll out progressively across three phases. The Government says existing leases won't be impacted — so if you're already in a novated lease, the rules you signed up under are preserved.
What this means for novated lease customers
Let's be straight about what's shifting here. The zero-FBT treatment that made EVs under the luxury car threshold essentially free of fringe benefits tax is being wound back — but it's not disappearing entirely. A permanent 25 per cent FBT discount is still a meaningful concession compared to petrol or diesel vehicles, which attract the full FBT rate.
The Government has linked the timing to the New Vehicle Efficiency Standards, which it says has already driven a significant increase in affordable EV models available in Australia. The policy logic — as stated in the Treasury Ministers release — is to focus the concession on those more accessible, lower-cost vehicles going forward.
For anyone currently shopping an EV novated lease, the phase-in timeline matters. If you're in the market now, the phase you enter under will determine your FBT treatment — which is exactly the kind of detail worth getting right before you sign anything.
Common questions
Will my existing EV novated lease be affected by these changes?
According to the Government's announcement, existing leases won't be impacted by the changes. If you're already in a novated lease, the rules in place when you signed should continue to apply for the life of that lease.
Is the EV FBT exemption being scrapped entirely?
No. The full exemption is being replaced over time with a permanent 25 per cent discount on FBT for eligible electric vehicles. That's a reduction in the benefit, but EVs will still receive more favourable FBT treatment than conventional petrol or diesel vehicles.
What is a novated lease, and why does FBT matter?
A novated lease is a salary-packaging arrangement where your employer deducts lease payments from your pre-tax salary. FBT is normally triggered by employer-provided cars, so the size of any FBT concession directly affects how much of the benefit you actually keep.
Which EVs will qualify for the 25 per cent FBT discount?
The Government has indicated the concession will focus on affordable EV models, in line with new vehicle availability under the New Vehicle Efficiency Standards. Full eligibility criteria are expected to be detailed as the three phases are legislated — we'll update this page as that detail emerges.
Should I rush to get an EV novated lease before the changes kick in?
That depends on your personal situation, which vehicle you're after, and which phase applies to your timing. It's worth getting a proper quote and understanding the phase-in schedule before making a decision — rather than acting on urgency alone.