An electric car valued above $75,000 that is first provided under a novated lease on or after 1 April 2027 will no longer be fully exempt from fringe benefits tax. It will use a 15% statutory rate instead. Electric cars valued up to and including $75,000 keep the full exemption for leases that start before 1 April 2029. Leases already running are not affected.
That is the measure announced in the 2026-27 Federal Budget. On a $120,000 salary with an electric car priced at $85,000, our model puts the saving against buying at $8,993 a year for a lease starting before 1 April 2027 and $4,913 a year for one starting after, a difference of $4,080 a year.
The three periods
| Lease starts | EV valued up to $75,000 | EV above $75,000, up to the luxury car tax threshold |
|---|---|---|
| Before 1 April 2027 | Fully exempt | Fully exempt |
| 1 April 2027 to 31 March 2029 | Fully exempt | 15% statutory rate |
| On or after 1 April 2029 | 15% statutory rate | 15% statutory rate |
The upper limit is the fuel-efficient luxury car tax threshold, $91,661 for 2026-27; it is indexed each 1 July. An electric car above that threshold has never been eligible and stays on the ordinary 20% rate. The other eligibility rules are unchanged: a battery electric or hydrogen fuel cell car, first held and used on or after 1 July 2022. Plug-in hybrids have been outside the exemption for new leases since 1 April 2025. The FBT and EV exemption page covers those rules.
What the 15% rate means in practice
The Budget describes the new setting as a 25 per cent discount on FBT. It works through the statutory formula: the taxable value of the car becomes 15% of its value each year instead of 20%. It is not 25% off the lease.
Most people will cancel the FBT with the Employee Contribution Method, as petrol car drivers already do. That means paying 15% of the car's value each year from after-tax income. On a $85,000 car that is $12,750 a year paid post-tax, where the same car on a lease starting before 1 April 2027 has the whole package paid pre-tax.
Worked examples
Each row is a $120,000 salary, a three-year lease at 8%, 15,000 km a year and $3,968 of running costs, comparing the lease with buying the same car on a loan. Figures are the annual saving against buying.
| Car price | Starts before 1 April 2027 | Starts 1 April 2027 to 31 March 2029 | Starts from 1 April 2029 |
|---|---|---|---|
| $58,000 | $6,769 | $6,769 | $3,985 |
| $75,000 | $8,234 | $8,234 | $4,634 |
| $85,000 | $8,993 | $4,913 | $4,913 |
The lease still beats buying in every case, because the GST saving and the pre-tax treatment of the rest of the package remain. The change roughly halves the advantage on the affected cars. Use the calculator with your own salary and choose the start date to see your figure.
Existing leases keep their treatment
The Budget papers say all eligible electric cars will retain the FBT discount rate that was in place when the arrangement commenced. A lease running today stays exempt until it ends. Refinancing the residual into a new lease, or starting a lease on a different car, is a new arrangement and takes the rules that apply on its start date.
If you are ordering a car above $75,000
- The start date is what counts. The measure refers to cars "provided" in each period. Ask the provider in writing which date they treat as the start, and what happens if delivery slips past 31 March 2027.
- Check the price definition. The Budget paper says "valued" up to and including $75,000 without setting out how value is measured. Until the legislation is published, treat a car within a few thousand dollars of $75,000 as uncertain.
- Do not let the deadline pick the car. A cheaper EV under $75,000 keeps the full exemption for another two years.
Reportable fringe benefits do not change
The Budget paper states that reportable fringe benefits for eligible electric cars will continue to be worked out as if a 20% statutory rate applied. So the amount added to your income for HELP repayments, the Medicare levy surcharge and child support stays as it is now, whichever period the lease starts in.
See the difference on your own numbers
The calculator shows the mechanics. A provider quote adds the exact interest rate, fees and running-cost budget for your car and employer. Get two or three quotes and compare them line by line against the figures above before you sign.
See how a novated lease worksFrequently asked questions
When does the EV FBT exemption end?
It does not end on a single date. Under the 2026-27 Budget measure, an eligible electric car valued above $75,000 that is first provided on or after 1 April 2027 moves to a 15% statutory rate. An eligible electric car valued up to and including $75,000 keeps the full exemption if it is provided before 1 April 2029. From 1 April 2029 the 15% rate applies to all eligible electric cars.
Is my existing EV novated lease affected?
No. The Budget papers state that eligible electric cars keep the FBT discount rate that was in place when the arrangement commenced. A lease that is already running, or one that starts before the relevant date, keeps its treatment for the life of that arrangement. A new lease or a refinance after the date is a new arrangement.
Do I need to order an EV over $75,000 before 1 April 2027?
What matters is when the car is first provided to you under the lease, not when you order it. Delivery delays are the risk: for the plug-in hybrid cut-off on 1 April 2025 the ATO had no discretion to extend the date for late deliveries. If the saving depends on the exemption, ask the provider what happens if the car arrives after 31 March 2027.
What is the 25 per cent FBT discount on electric cars?
It is a lower statutory formula rate, 15% instead of the ordinary 20%. It is not 25% off your lease payments. With the Employee Contribution Method you pay 15% of the car's value each year from after-tax income to cancel the FBT, where a petrol car needs 20% and a fully exempt EV needs nothing.
Is the change law yet?
It was announced in the 2026-27 Federal Budget on 12 May 2026 and is set out in Budget Paper No. 2. When this page was written on 14 November 2026 we had not confirmed that the amending legislation had passed. Check the ATO website or ask your provider before you rely on it.
Source and status. 2026-27 Budget Paper No. 2, "Electric Car Discount: more sustainable fringe benefits tax treatment of electric cars", read 14 November 2026. This is announced policy. We had not confirmed on that date that the legislation had passed, and details such as how a car's value is measured may change. General information only; confirm with your provider and a registered tax agent.