Changes to FBT exemption for electric vehicles (May Federal Budget 2026)
The Government has confirmed its proposed changes to the FBT exemption for electric vehicles (EVs).
The changes will be phased in over the next three years until a permanent 25% discount is operating from 1 April 2029 for all eligible EVs. There will be no changes in the current FBT year (ending 31 March 2027). For EVs costing less than $75,000, there will be no changes until 1 April 2029.
Current law
Car benefits are currently exempt from FBT if the car is a zero or low emissions vehicle, provided the value of the car at the first retail sale was below the luxury car tax threshold for fuel efficient vehicles. This applies to benefits provided on or after 1 July 2022 if the car is first held and used on or after that date.
Broadly speaking, a vehicle is a zero or low emission vehicle if it is a battery electric vehicle or a hydrogen fuel cell electric vehicle. The car also must be a passenger vehicle designed to carry a load of less than one tonne and fewer than nine passengers. Note that plug-in hybrid electric vehicles are not zero or low emission vehicles for the purposes of the FBT definition (subject to some transitional provisions which spanned 1 April 2025).
Proposed changes
Details of the changes are as follows:
- 2026–2027 FBT year: no change.
- 2027–2028 and 2028–2029 FBT years: full discount for EVs costing $75,000 or less to continue. EVs costing more than $75,000 but less than the luxury car tax threshold will receive a 25% discount on their payable FBT.
- 2029–2030 FBT year onwards: all EVs below the luxury car tax threshold will receive a 25% discount on payable FBT (rather than the full discount).
The luxury car tax threshold for 2025–2026 is $91,387. This is reviewed annually (and in a period of higher inflation would be expected to increase).
Eligible EVs will continue to be exempt from import tariffs (ie on an ongoing basis).