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Until 31 March 2027
Nothing changes
Any eligible battery electric vehicle priced under the luxury car tax threshold for fuel-efficient vehicles ($91,661 for the 2026-27 financial year) is fully exempt from FBT.
FBT changes guide
The EV FBT exemption is changing. Here is what it actually means for you.
The federal government has confirmed how the electric vehicle FBT exemption will wind down over the next three years. If you have been thinking about a novated lease on an electric vehicle, the timing of your decision now genuinely matters. Not for everyone, and not equally. This page breaks down exactly who is affected, when, and by how much.
TL;DR
- Until 31 March 2027, eligible EVs under the fuel-efficient LCT threshold remain fully FBT exempt.
- From 1 April 2027, EVs under $75,000 keep the full exemption, while higher-priced eligible EVs move to a 25 per cent FBT discount.
- From 1 April 2029, all eligible EVs under the LCT threshold move to the 25 per cent discount.
- Leases signed before 1 April 2027 keep the rules they started under for the full lease term.
First, a quick refresher on why the exemption matters
Fringe benefits tax (FBT) is a tax your employer pays when they provide you with a benefit on top of your salary. A car through a novated lease is one of those benefits, and FBT is normally charged at 47 per cent of the taxable value of the car.
In practice, most novated leases are structured so you cover that FBT liability yourself, by paying a chunk of your lease costs from your after-tax salary instead of your before-tax salary. That after-tax portion is what erodes most of the tax benefit of a novated lease on a petrol car.
The electric vehicle exemption, introduced in 2022, removed FBT entirely on eligible battery electric vehicles. No FBT means no after-tax portion. Your entire lease, including running costs like registration, insurance, servicing and charging, comes out of your before-tax salary. That is where the large savings on electric vehicle novated leases come from.
What is changing, and when
The government has confirmed a three-phase wind-down:
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From 1 April 2027
The full exemption gets a price cap
Electric vehicles priced under $75,000 keep the full exemption. Vehicles priced between $75,000 and the luxury car tax threshold move to a 25 per cent FBT discount instead.
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From 1 April 2029
The full exemption ends for everyone
All eligible electric vehicles under the luxury car tax threshold move to the 25 per cent discount, regardless of price.
The single most important detail: you keep the rules you sign under
If you sign a novated lease before 1 April 2027, you keep the full exemption for your entire lease term. Sign a five-year lease in late 2026 and you are covered until late 2031, even though the rules change twice during that time.
This is not a sales line. The government's own announcement states that existing leases will not be impacted, and the budget papers confirm that eligible electric cars retain the FBT treatment that was in place when the arrangement commenced. It is also the same grandfathering approach used when plug-in hybrids lost their exemption in April 2025. People who signed plug-in hybrid leases before that deadline kept their exemption. People who signed after did not.
Important caveat
The detail can still move
These changes were announced in the May 2026 Budget but have not yet passed Parliament. The detail could shift as the legislation is drafted. What is on this page reflects the government's announcement and budget papers as they stand, and we will update it if anything changes.
Grandfathering also relies on your commitment staying financially binding. If you materially change the lease later, such as extending it beyond the original term, the protection can end from that point. Optional extensions are not covered.
Example one: you want a car under $75,000
Most popular EVs
The 2027 deadline does not apply to your car
This covers most of the electric vehicles Australians actually lease. The majority of popular models sit comfortably under $75,000.
Here is your situation in plain terms: nothing changes for you until 1 April 2029. You can sign a novated lease in 2026, 2027 or 2028 and get the full exemption either way.
You are not facing a 2027 deadline. Your deadline, if you want to call it that, is 1 April 2029. Sign before then and the full exemption is locked in for your whole lease term. Sign after and you get the 25 per cent discount instead, which still helps, but is a long way from paying zero FBT.
So if you are shopping in this price range, the honest advice is simple. Decide properly, on your own timeline. Do not let anyone use the 2027 date to pressure you, because it does not apply to your car.
Example two: you want a car between $75,000 and $91,661
Deadline-sensitive EVs
This is where the April 2027 date has real teeth
Take an electric vehicle priced at $80,000. Sign a novated lease before 1 April 2027 and the full exemption applies for your entire lease term. Every dollar of the lease comes out of your before-tax salary, and no FBT is payable at any point.
Sign the same lease after 1 April 2027 and the car no longer qualifies for the full exemption. It gets the 25 per cent discount instead, which means 75 per cent of the normal FBT liability applies to your lease.
FBT on a car is normally calculated using the statutory formula, which sets the taxable value at 20 per cent of the car's value. The government's 25 per cent discount works by reducing that rate to 15 per cent. On an $80,000 vehicle, that is a taxable value of $12,000 a year.
Most leases handle an FBT liability through the employee contribution method, where you pay an amount equal to the taxable value from your after-tax salary. So under the new rules, roughly $12,000 a year of your lease costs would need to come from your after-tax salary instead of your before-tax salary.
That does not mean you are $12,000 worse off, because you were always going to pay that money either way. The real cost is the tax advantage you lose on it, which for an $80,000 car works out to several thousand dollars a year depending on your marginal tax rate. Over a five-year lease, the difference between signing before and after the deadline runs well into five figures.
Check the right price
Use the FBT base value, not just drive-away price
The $75,000 cap refers to the car's value for FBT purposes, which is broadly the price of the car before on-road costs like stamp duty, registration and compulsory third party insurance. A car with a drive-away price a little over $75,000 may still sit under the cap.
If you are looking at a car in this bracket, the window to lock in the full exemption closes on 31 March 2027. That is a real, legislated date, not marketing urgency.
Does this mean you should rush?
No. It means you should decide properly, sooner rather than later.
A deadline does not change whether a novated lease makes sense for you in the first place. That still depends on your salary, your employer's arrangements, how far you drive, and the car you want. If a novated lease is marginal for your situation, signing one to beat a deadline just locks in a marginal deal for five years.
It also cuts the other way. If the numbers already work for you and your car sits over $75,000, waiting past April 2027 costs you real money for no benefit. The worst outcome is drifting past the deadline without ever having checked.
Where to from here
Take the quiz. It takes a few minutes, it is free, and it will tell you whether a novated lease actually makes sense for your situation, including which side of the $75,000 line your preferred cars sit on. If a novated lease is not right for you, we will say so. That is the whole point of LeasePlease.
If the numbers do work, we can connect you with an independent expert who will walk you through it properly, with the deadline in view but never as the reason to sign.
Frequently asked questions
The full exemption starts winding down from 1 April 2027 for eligible EVs above $75,000. From 1 April 2029, all eligible EVs under the luxury car tax threshold move to a 25 per cent FBT discount.
Want to know where you stand?
Answer a few quick questions and get an honest view on whether leasing actually stacks up before the rules change.