The Australian Government is conducting a formal review of the Electric Car Discount — the FBT exemption that has made EV novated leases one of the most powerful tax benefits available to employees. The review was announced in December 2025, submissions closed in February 2026, and a final report is due by mid-2027. Here is exactly what is under review, what could change, what it means for existing leases, and how to think about the decision right now.
The EV FBT exemption is fully in force. Battery EVs and hydrogen fuel cell vehicles under $91,387 are still completely exempt from FBT under a novated lease. No changes have been legislated. The review is ongoing.
In December 2025, the Australian Government announced a statutory review of the Electric Car Discount — the policy that has exempted eligible EVs from Fringe Benefits Tax since 1 July 2022. The review is being conducted jointly by the Australian Centre for Evaluation (within Treasury) and the Department of Climate Change, Energy, the Environment and Water.
| Vehicle type | FBT exempt? | Threshold (FY2025-26) |
|---|---|---|
| Battery electric vehicle (BEV) | ✓ Yes — fully exempt | Under $91,387 |
| Hydrogen fuel cell vehicle | ✓ Yes — fully exempt | Under $91,387 |
| PHEV (new arrangements from April 2025) | ✗ No — full FBT applies | N/A |
| PHEV (pre-April 2025 binding lease) | ✓ Grandfathered until lease ends | Original terms apply |
| Standard hybrid (non plug-in) | ✗ No — never was exempt | N/A |
| Petrol / diesel | ✗ No — full FBT applies | N/A |
For an eligible BEV, the saving is substantial. FBT under the statutory method on a $70,000 vehicle would be approximately $13,720 per year — all of which is eliminated under the current exemption. On top of this, salary sacrifice still reduces your income tax. The combined annual saving can exceed $15,000 for employees in higher tax brackets.
The Electric Car Discount was always described as a time-limited measure to accelerate EV adoption during the early, high-cost phase of the transition. Three key things have changed since 2022:
Nearly 100,000 Australians had accessed the FBT exemption by late 2025 — the majority through salary-packaged novated leases. The salary packaging industry has grown significantly around the policy, and industry groups have been vocal in submissions advocating for its continuation.
No changes have been announced, and any changes would require legislation to pass parliament after the review reports. Based on the review's terms of reference and analyst commentary, the most commonly discussed scenarios are:
Industry analysts widely note that full removal is the least likely outcome, given Australia's EV adoption targets and the political cost of removing a benefit already used by ~100,000 Australians. The most likely change, if any, is a tighter threshold or a phased reduction.
Speculation about outcomes is just that — speculation. The ATO and government have confirmed only that the review is taking place and that a report is expected by mid-2027. Nothing is decided. Do not make financial decisions based on what commentators think might happen.
This is the question most people in an active or about-to-start novated lease are asking. The honest answer is: we do not know for certain — but the evidence strongly suggests existing leases will be grandfathered.
Australian tax law has a strong convention of grandfathering existing arrangements when benefits are removed or reduced. The most recent example is directly relevant:
When the PHEV FBT exemption was removed on 1 April 2025, the ATO specifically provided that arrangements entered into before that date under a financially binding commitment could continue under the original terms for the life of the lease. Only new arrangements after the cut-off lost the benefit.
This is the precedent. It is the most likely template for any future changes to the BEV exemption — a cut-off date after which new arrangements no longer qualify, while existing leases run to completion. This is not guaranteed, but it is consistent with how Australian tax transitions are handled.
If you enter a novated lease for an eligible BEV in 2026 — before any changes are legislated — you are very likely to retain the exemption for the full term of your lease, based on the PHEV precedent. This is one reason why some financial commentators describe 2026 as a good year to lock in a 3–5 year lease. General information only — not financial advice.
This depends entirely on your personal situation. Here is a practical framework:
Run your actual numbers. The right decision depends on your salary, your vehicle, your employer's arrangement, and how long you plan to keep the car — not on speculation about policy. A $72,000 EV for a $100,000 salary employee looks very different to a $45,000 EV for a $65,000 salary employee. Model it before you decide.
The Veercal novated lease calculator shows your exact tax saving, FBT position, take-home pay impact, and total cost — step by step. Toggle EV mode to apply the current FBT exemption and see how your out-of-pocket compares to a personal loan or cash purchase for the same vehicle.
Enter your salary, vehicle price, and annual km. The calculator applies the current FBT exemption and compares your true total cost across every finance structure.
Open Novated Lease Calculator →