Cheaper EVs spared in Electric Car Discount wind-back

Key takeaways

• Cheaper EVs keep full Electric Car Discount until April 2029
• Pricier EVs face 25% FBT discount from April 2027
• Wind-back to save the federal budget $1.7 billion

Cheaper electric vehicles will be spared as the Federal Government winds back the Electric Car Discount in two stages from April 2027. EVs priced at $75,000 or less will keep the full FBT exemption until April 2029, while pricier electric cars lose access to the full benefit sooner. Existing novated leases will be grandfathered, so current EV drivers won't be affected.

Treasurer Jim Chalmers and Climate Change and Energy Minister Chris Bowen confirmed no changes will apply until 1 April 2027. The decision follows a statutory review that found the scheme cost roughly 18 times more in lost tax revenue than first forecast.

How the Electric Car Discount changes from 2027

EVs priced at $75,000 or less will keep the full Fringe Benefits Tax exemption until 31 March 2029. Vehicles priced between $75,001 and the fuel-efficient LCT threshold (currently $91,387) will only get a 25% FBT discount from 1 April 2027.

From 1 April 2029, the 25% discount applies to every eligible EV under the LCT threshold, with no current end date. A separate $120,000 zero-emissions vehicle LCT threshold is also due to take effect from 1 July 2027 as part of the EU free trade deal.

Electric Car Discount timeline

Why the Federal Government is scaling it back

The wind-back is forecast to save the federal budget $1.7 billion over five financial years. Treasury originally projected a $70 million annual cost for the FBT exemption, but actual spending is tracking at $1.35 billion this financial year, on a path to $2.8 billion by 2028-29 if left unchanged.

The Government's review found the policy worked. Around 64,000 extra EVs hit Australian roads over the three years to December 2025, EV market share jumped from 1.8% to 8.3%, and the median EV price fell 22% over the same period.

Electric Vehicle Council CEO Julie Delvecchio welcomed the staged approach, saying most EVs on sale today will keep the full Discount until 2029. She framed the policy as cost-of-living support, pointing to roughly $3,000 a year in fuel and maintenance savings for EV households.

What it means for Australian EV buyers

For buyers, the practical message is straightforward: salary-packaged EVs under $75,000 still attract the full tax break for at least three more years. Anyone considering a higher-priced electric car has a clear deadline of 31 March 2027 to lock in the full exemption.

Frequently asked questions

When does the Electric Car Discount change in Australia?

The first changes take effect on 1 April 2027. A second round of changes follows on 1 April 2029, after which all eligible EVs under the LCT threshold receive a 25% FBT discount rather than a full exemption.

Will existing EV novated leases be affected by the changes?

No. The Federal Government has confirmed existing novated lease arrangements will be grandfathered, so current EV leaseholders keep their current FBT treatment for the duration of their lease.

Which EVs will keep the full FBT exemption after April 2027?

Electric vehicles priced at $75,000 or less will keep the full FBT exemption until 31 March 2029. This covers most popular EVs in Australia, including models from BYD, Tesla, Hyundai and Kia.