{"id":649163,"date":"2026-05-04T14:29:14","date_gmt":"2026-05-04T14:29:14","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/649163\/"},"modified":"2026-05-04T14:29:14","modified_gmt":"2026-05-04T14:29:14","slug":"electric-vehicle-tax-discount-to-be-wound-back","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/649163\/","title":{"rendered":"Electric vehicle tax discount to be wound back"},"content":{"rendered":"

The popular tax discount exempting electric vehicles from Fringe Benefits Tax (FBT) will be wound back next year, saving the government $1.7 billion over four years.<\/p>\n

But the government has not abandoned the tax discount for electric vehicles entirely \u2014 despite its massive popularity costing the budget more than 10 times the $90 million it had originally forecast for this year alone.<\/p>\n

From April 2027, the tax exemption will still apply to electric vehicles costing less than $75,000, but those above that threshold will be taxed at 75 per cent of the usual rate of FBT.<\/p>\n

From April 2029, all electric vehicles will be taxed at that 75 per cent payable FBT rate.<\/p>\n

“Luxury” electric vehicles, currently those priced above $91,387, will continue to have to pay the full fringe benefits tax, as will used EVs from before July 2022.<\/p>\n

It will mean electric vehicles will have a tax of thousands of dollars applied to them from 2029, and some from next year.<\/p>\n

For example, using a simple Fringe Benefits Tax formula, a $50,000 petrol car acquired under a novated lease would have to pay about $9,800 a year in FBT, before any deductions such as fuel costs or days where the car was unavailable.<\/p>\n

A $50,000 EV would normally have no FBT applied, but from 2029 would have about $7,300 worth of FBT payable annually using the same simple method.<\/p>\n

But with lease agreements grandfathered from the point they are entered into, a person could acquire an EV in early 2029 under a five-year lease and remain FBT exempt until the mid 2030s.<\/p>\n

Tax to hit popular pathway for buying EVs<\/p>\n

Fringe Benefits Tax is a tax paid by employers for some benefits provided to an employee, such as if they pay for a gym membership or provide a laptop or car under a salary sacrifice program \u2014a tax that is often then passed on to the employee.<\/p>\n

But some items, including many electric cars, are exempt from that tax.<\/p>\n

That exemption has made buying an EV through a novated lease \u2014 where part of the lease is deducted from your taxable income \u2014 a popular way to get an EV, smoothing out high up-front costs and potentially saving money compared to buying a new car outright thanks to the reduced income tax a person would pay.<\/p>\n

Should you use a salary sacrifice to get an EV?<\/a><\/p>\n

With the petrol bowser continuing to hurt wallets, more Australians than ever are considering getting an electric vehicle through a novated lease.<\/p>\n

More than one-in-five new car sales last month were electric or plug-in hybrid, and the peak body for national car leasing estimates about half of EV sales are through novated leases.<\/p>\n

As EVs have become more established and cheaper options have become available, the federal government is focusing its tax discount on more affordable EVs to “ensure our tax settings are still suitable”.<\/p>\n

But with EVs enjoying renewed interest amid the fuel crisis triggered by the Iran war, the government has held back from scrapping a key incentive entirely.<\/p>\n

Discount’s blowout to $1.35 billion in a single year<\/p>\n

The tax discount was intended to be a modest benefit, forecast to cost about $90 million this financial year.\u00a0<\/p>\n

But its uptake has been well above expectations and it is now estimated to cost the government $1.35 billion this financial year, more than 10 times Treasury’s first estimates.<\/p>\n

\"a<\/p>\n

Treasurer Jim Chalmers has flagged several savings measures in next week’s budget, including to the Fringe Benefits Tax exemption. (ABC News: Matt Roberts)<\/p>\n

And with high borrowing costs, spending pressures from hospitals, defence and welfare payment growth driven by inflation, every federal minister has been asked to search their portfolios for budget savings.<\/p>\n

“There is a big emphasis in this budget on budget sustainability, and that does mean more savings,” Treasurer Jim Chalmers said yesterday.<\/p>\n

“There will be more savings, there will be more spending restraint, we will save more than we spend and we will bank the upward revisions to revenue as well<\/a>.”<\/p>\n

The government said its phased wind-back of the discount would encourage manufacturers to offer more affordable choices to the Australian market.<\/p>\n

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