The EV Discount Review in 2026: What You Need to Know
In May 2026, the Australian Government announced updates to its Electric Vehicle (EV) discount following a formal review, subject to the proposed changes being passed by Parliament.
The review recognised the important role the EV Discount and novated leasing has played in supporting Australians to access cleaner cars, while noting its significant influence in growing the EV market here.
The government confirmed that changes will be brought in gradually across three phases, not removed suddenly. Importantly, all existing arrangements will be honoured until the end of their lease period.
Phase 1: As You Were
The current settings will remain until 31 March 2027. This means you can continue to pay for eligible EVs with before-tax dollars up to the luxury car tax (LCT) threshold, which will remain at $91,661.
Phase 2: Vehicle Price
From 1 April 2027, the EV Discount will be more closely targeted by vehicle price. Electric vehicles priced below $75,000 will remain fully Fringe Benefits Tax (FBT)-discounted, while vehicles priced between $75,000 and the luxury car tax (LCT) threshold of $91,661 will be eligible for a reduced 25% FBT discount. (For more information about FBT, click here.)
Phase 3: 25% FBT Reduction on All EVs
From 1 April 2029, a 25% FBT discount will apply to all electric vehicles priced below the LCT threshold. This will remain the policy, with no end date.
Driving EV Affordability
These changes reflect the government’s view that EV ownership is becoming more affordable, while continuing to support Australia’s transition to electric transport as part of broader emissions targets.
Making the EV Discount Work for You
The EV Discount has been a gamechanger for Australian car-buying conversation and consideration – not least that in 2022, there were only two EVs retailing for under $40,000. Today, there are around 10 – with one model (the BYD Dolphin Essential) below $30,000. Where EVs once dwarfed petrol vehicles for price, today parity is much closer.
FAQs
What changes are being proposed to the EV Discount?
The Australian Government has proposed changes to the EV Discount, subject to legislation being passed by Parliament. The changes would be introduced gradually across three phases:
- Until 31 March 2027: The current EV discount arrangements will remain unchanged.
- From 1 April 2027: Eligible EVs with a base value up to $75,000 would continue to receive a 100% FBT exemption, while eligible EVs with a base value above $75,000 and below the LCT threshold would move to a 25% FBT discount.
- From 1 April 2029: A 25% FBT discount would apply to all eligible EVs with a base value below the LCT threshold.
Will my existing novated lease be affected?
What is meant by a new or updated contract?
A new or updated contract is where your existing novated lease arrangement ends or is changed resulting in a new lease agreement or commitment to provide the vehicle. If this occurs, the new arrangement may be subject to the EV Discount rules that apply at the time the new contract is entered into.
Examples may include:
- Changing employers and entering into a new novation agreement.
- Replacing your current vehicle.
- Refinancing or restructuring your lease.
- Starting a new lease at the end of your current lease term.
What is the base value of a vehicle?
The base value is generally the vehicle’s purchase price before government charges, such as registration and stamp duty, are added. It also includes dealer delivery charges, the cost of fitted non-business accessories, and applicable GST and Luxury Car Tax (LCT).
For example:
- A vehicle with a base value of $72,000 would fall below the $75,000 threshold.
- A vehicle with a base value of $82,000 would fall within the $75,000 to LCT threshold range.
The base value may be different from the vehicle's drive-away price.
What is the Luxury Car Tax (LCT) threshold?
Will novated leasing still provide tax benefits after the changes?
Should I consider ordering an EV before 1 April 2027?
Maxxia Is Here to Help
We know policy updates can raise questions, and we’re here to help. As one of Australia’s largest novated lease providers, with more than 30 years’ experience helping Aussies save tax by salary packaging a car, Maxxia is committed to keeping customers informed and supported. Our team is always available to explain how novated leasing works and what the current EV discount settings mean for you.
If you would like to learn more about how an EV on novated lease could work for you, select your desired vehicle and crunch the numbers in our handy calculator, or call us on 1300 123 123.
DISCLAIMER
From 1 April 2027 to 31 March 2029, the Australian Government's EV FBT exemption is proposed to reduce from a 100% to a 25% FBT discount for eligible electric vehicles with a base value between $75,000 and the fuel-efficient car luxury tax (LCT) threshold (for FY26-27 the LCT threshold is $91,661).
Eligible electric vehicles with a base value below $75,000 will continue to qualify for the 100% FBT exemption, subject to applicable eligibility requirements.
Vehicles that meet current eligibility requirements may continue to qualify for the 100% FBT exemption under transitional grandfathering arrangements where they are provided to employees under a financially binding commitment entered into before 1 April 2027 and that commitment remains in place on or after that date (excluding optional agreement extensions).
For vehicles relying on these grandfathering arrangements, the vehicle must have been delivered by 31 March 2027 to remain eligible for the exemption.
This information is based on draft legislation and is subject to change. It is general information only and does not constitute tax, financial or legal advice.
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