dailyloe.com – The Australian government plans to reduce electric vehicle tax discounts starting next year. This change affects the fringe benefits tax (FBT) for electric vehicles, adding thousands to novated leases.
From April 2027, electric vehicles priced over $75,000 will incur a 75 percent FBT rate. By March 2029, all electric vehicles will be subject to this rate, although the FBT will still be lower compared to petrol vehicles.
The government aims to save $1.7 billion over four years by winding back the tax exemption. This discount had previously cost the budget more than ten times the forecast of $90 million for this year alone.
Luxury electric vehicles, currently defined as those priced above $91,387, will continue to pay the full FBT rate. Used electric vehicles purchased before July 2022 will also be taxed fully.
An example of the impact shows a $50,000 petrol car under a novated lease would incur about $9,800 annually in FBT. In contrast, a $50,000 electric vehicle would currently be exempt but could face approximately $7,300 in FBT by 2029.
Lease agreements will remain grandfathered, meaning individuals can acquire an electric vehicle in early 2029 under a five-year lease and remain exempt from FBT until the mid-2030s.
Fringe Benefits Tax is a tax levied on employers for certain benefits offered to employees, such as gym memberships or cars under salary sacrifice programs.
Many electric vehicles have been exempt from this tax, which has made novated leases a popular option for acquiring EVs.
