EV FBT exemption explained

In 2026-27, a zero or low emission car is exempt from FBT on a novated lease if it was first held and used on or after 1 July 2022 and luxury car tax was never payable on it. Plug-in hybrids are excluded from 1 April 2025 unless there was a pre-existing commitment. The benefit is still reportable. Source: ATO.

Test a car in the EV novated lease calculator or the main novated lease calculator. If you are new to novated leases, start with how a novated lease works.

Who qualifies for the EV FBT exemption?

• The car is zero or low emission. Battery electric cars qualify.
• It was first held and used on or after 1 July 2022. How this applies to a second-hand car is not verified; check the ATO page (see used car).
• Luxury car tax was never payable on the car.
• Plug-in hybrids are excluded from 1 April 2025, unless there was a pre-existing commitment. Check the exact transitional wording on the ATO page before relying on it.
• An exempt car is still a reportable fringe benefit.

Source: https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax/types-of-fringe-benefits/fbt-on-cars-other-vehicles-parking-and-tolls/electric-cars-exemption

Why does the luxury car tax threshold matter?

The exemption only applies if luxury car tax was never payable, so the LCT threshold works as a price ceiling for most EVs. For 2026-27 the ATO lists $91,661 for fuel-efficient vehicles and $80,809 for other vehicles, with LCT charged at 33%. The fuel-efficient threshold was $91,387 in 2025-26.

Our calculator bases eligibility on your confirmation that LCT has never been payable, plus the car type and first-held date. If the drive-away price you enter is above $91,661 it shows a warning to check, but does not override your answer. Using the drive-away price for this check is a screening assumption we have not verified. Which threshold applies to a given EV is also not verified; we use the fuel-efficient one.

Source: https://www.ato.gov.au/tax-rates-and-codes/luxury-car-tax-rate-and-thresholds

How much is the EV FBT exemption worth?

Without the exemption, a car's FBT taxable value is 20% of its base value each year. On a $60,000 car that is $12,000 a year, which a petrol-car package would usually cover from post-tax pay. With the exemption that amount is nil, so the whole package can be paid pre-tax. In the calculator's example ($100,000 salary, 3 years, 8% example rate) the BEV saves $6,155 a year in income tax and Medicare levy.

The reportable fringe benefit estimate for that car is $22,642 for the first FBT year (base value × 20% × C/D × 1.8868 type 2 gross-up; method not verified). Its effect on income tests is also not verified.

What are the tax changes for EV novated leases from 2027? NOT YET LAW

• Full discount continues to the end of March 2027.
• 1 April 2027 to 1 April 2029: EVs at or below $75,000 keep 100%; EVs over $75,000 but below the LCT threshold get a 25% discount (15% statutory rate).
• From 1 April 2029: all eligible EVs get the 25% discount.
• Existing leases are said not to be impacted.

Source: https://www.ato.gov.au/about-ato/new-legislation/in-detail/businesses/electric-car-discount-more-sustainable-fbt-treatment-of-electric-cars. We have not verified which value the $75,000 test applies to. Status re-checked 17 Oct 2026; re-check before relying on it.

How do you calculate FBT for an EV?

If the car qualifies, the taxable value is nil under current rules. If it does not, the statutory formula applies: base value × 20% (× days available ÷ days in the year, less employee contributions). Under the announced rules a discounted EV would use 15%. The full method is on FBT on a novated lease and our methodology.

By Abdisalan Awale, editor. Published by Abdisalan Awale, ABN 64 886 470 398 (about us). Last reviewed 17 Oct 2026 against the sources on our sources page. Not yet reviewed by a qualified third party. How we calculate: methodology.