Australians with an existing electric vehicle (EV) novated lease have been reassured that proposed changes to the Fringe Benefits Tax (FBT) exemption will not affect their current arrangements, according to salary packaging provider Paywise.
The Federal Government has flagged changes to the EV FBT exemption that would begin from April 2027, but Paywise CEO Frank Agostino said there is considerable confusion about what the changes actually mean for current and future EV drivers.
“Many Australians are hearing headlines about changes to EV tax incentives and wondering whether the benefit is disappearing altogether,” said Agostino.
“The simple answer is no – and importantly, nothing changes until April 2027.”
The FBT exemption, introduced as part of the Electric Car Discount, has been a key driver of EV adoption through novated leasing by allowing eligible electric vehicles to be financed without attracting FBT.
Agostino said eligible EVs financed under a novated lease remain fully exempt under the current rules.
“Right now, eligible EV novated leases remain fully tax free,” he said.
“There is currently no FBT to pay and no requirement for post-tax contributions, which is why novated leasing continues to be one of the most cost-effective ways to get into an electric vehicle.”
Under the proposed changes, the exemption would be gradually reduced rather than removed entirely.
From April 2027, EVs priced under $75,000 would remain fully exempt from FBT. Vehicles priced between $75,000 and the Luxury Car Tax threshold, currently $91,387, would move to a reduced-benefit model with a 25 per cent FBT discount.
A further change is proposed from April 2029, when all eligible EVs under the Luxury Car Tax threshold would transition to the 25 per cent FBT discount model.
For fleet buyers, leasing providers and employees considering an EV through salary packaging, the most significant detail may be the treatment of existing leases.
“The Government has confirmed that existing EV novated leases will be grandfathered,” said Agostino.
“If you already have an EV novated lease in place with your current employer, these changes will not impact your existing arrangement.”
He noted, however, that changes to an existing lease arrangement could affect eligibility.
“For most people with an existing eligible EV novated lease, the announcement indicates their current arrangement should continue as is. That said, changes such as moving employers, refinancing, extending the lease or entering a new arrangement may affect how the rules apply, so please seek advice before making any change.”
The comments are likely to provide some certainty for the growing number of employees who have adopted EVs through novated leasing since the introduction of the FBT exemption.
Agostino said the proposed policy changes should be viewed as a gradual reduction in support for future arrangements rather than the end of EV incentives.
“The policy is not being abolished. The incentive is simply being scaled back progressively over time for new leases moving forward,” he said.
The announcement also comes at a time when households continue to face pressure from fuel prices and broader cost-of-living increases. Agostino encouraged consumers to compare the whole-of-life cost of vehicle ownership rather than focusing solely on purchase price.
“Today, many Australians can still access a mid-range EV for around $150 per week through a novated lease, including finance, electricity, insurance, registration, servicing and tyres,” he said.
“When you compare that against what many households are currently spending on petrol and vehicle running costs every week, the savings can be substantial.”
Paywise estimates that an employee earning $75,000 annually, driving 15,000km per year and packaging a vehicle over five years, could save up to $33,381 on a new Toyota HiLux BEV through a novated lease arrangement.
For fleet stakeholders monitoring EV adoption trends, the proposed FBT changes appear designed to taper government support over time while maintaining incentives for lower-cost EVs and protecting existing lease holders from unexpected tax impacts.
