For the Australian EV enthusiast, the greatest single barrier to ownership has long been the upfront purchase price. While running costs are low, the initial investment often stalls the switch to electric. However, thanks to a powerful piece of legislation, the government isn’t just encouraging the transition—it’s actively subsidising it through the tax system.

We’re talking about the Electric Car Discount Bill, and specifically, the Fringe Benefits Tax (FBT) Exemption.

This incentive is not merely a small discount; it is arguably the single most impactful financial mechanism driving EV adoption in Australia. By leveraging a novated lease, an employee can effectively use pre-tax income to pay for a new electric vehicle, saving thousands of dollars every year—a saving we estimate can reach over $18,000 on an eligible mid-range EV over a five-year lease term.

At EV Evolution, we see this exemption as the true catalyst for the market shift, moving electric cars from a luxury item to a financially savvy, mainstream choice. It’s the ultimate “tax hack” for employees.

📚 FBT 101: Understanding the Power of the Exemption

To appreciate the savings, we first need to understand the tax.

Normally, when an employer provides an employee with a “fringe benefit”—such as a car for private use, even through a salary packaging (novated lease) arrangement—the employer must pay Fringe Benefits Tax (FBT). This tax is punitive, currently levied at a rate of 47% on the taxable value of the benefit.

This high tax is historically why novated leases on petrol cars were often financially marginal.

The EV Exemption Changes Everything:

The Treasury Laws Amendment (Electric Car Discount) Act 2022 dictates that eligible zero or low-emission vehicles are exempt from FBT when provided by an employer (including under a novated lease).

When the FBT is removed, the entire lease payment—including finance, registration, insurance, and running costs—can be paid from your pre-tax income. This reduces your total taxable income, putting you in a lower tax bracket and dramatically increasing your take-home pay.

Key Requirement 1: The LCT Threshold

For the exemption to apply, the car must never have been subject to the Luxury Car Tax (LCT). The LCT threshold for fuel-efficient vehicles is crucial:

• 2025-2026 Financial Year Threshold: $91,387 (including GST and dealer delivery charges).

If the LCT value (the price of the car plus GST, customs duty, and dealer delivery) exceeds this figure at the time of its first sale, the vehicle is ineligible for the FBT exemption—forever. This price cap is the reason why many mid-spec and entry-level EVs are selling so well.

Key Requirement 2: Eligibility Rules

To qualify for the FBT exemption, the vehicle must meet these specific criteria:

1. Zero or Low Emission: Must be a Battery Electric Vehicle (BEV) or a Hydrogen Fuel Cell Electric Vehicle (FCEV).
2. PHEV Status: Plug-in Hybrid Electric Vehicles (PHEVs) are no longer eligible for the FBT exemption if they are acquired on or after 1 April 2025. This is a critical cut-off date.
3. First Use Date: The car must be first held and used on or after 1 July 2022. This means certain second-hand EVs may still qualify, provided they meet all other criteria.
4. Provided by an Employer: The vehicle must be provided or leased by the employer to an employee (i.e., through a novated lease). Private purchases do not qualify.

🚗 Which Popular Models Qualify in 2026?

The $91,387 threshold covers the vast majority of the Australian EV market, ensuring mainstream access to the discount.

Here is a selection of the most popular vehicles that qualify for the FBT exemption as of early 2026 (Note: Pricing is indicative and subject to change):

The Warning Zone

Buyers must be careful when selecting options and accessories. Adding premium paint, larger wheels, or certain option packages can push the LCT value of a vehicle just over the $91,387 line, permanently losing the FBT exemption. This is a crucial detail where professional advice is paramount.

💸 The Financial Transformation: Why Novated Lease is Now Key

The FBT Exemption makes the novated lease structure the ultimate “tax hack” for employees.

Under a standard novated lease for an FBT-exempt EV, your entire vehicle budget is paid from your gross (pre-tax) salary:

• Lease Repayments: The car itself.
• Running Costs: Registration, insurance, servicing, tyres, and even electricity used for charging (via the ATO’s 4.20 cents per kilometre shortcut method).

Because these costs bypass income tax entirely, you save at your highest marginal tax rate (MTR). For an Australian employee on an income of $120,000 (with a MTR of 37% + Medicare), every dollar paid towards the car is a 39% discount on the actual cost.

This is how an $18,000 saving is unlocked over a typical five-year lease, often making an EV like a Tesla Model 3 Long Range effectively cheaper to run than a comparable Toyota Camry Hybrid purchased with post-tax money.

🔌 Beyond FBT: Exempt Running Costs

The tax benefits don’t stop with the car itself. Crucially, the following associated car expenses are also FBT-exempt:

• Registration and CTP Insurance
• Compulsory Third-Party Insurance
• Routine Maintenance and Servicing
• Tyres and Repairs
• The Cost of Electricity (Fuel)

This bundled exemption means the predictable, low-cost nature of EV ownership is amplified by the tax savings, creating an unparalleled financial argument for switching.

🚀 Join the Evolution: Get Your Personalized Savings Snapshot

Understanding the mechanics of the FBT exemption—especially the complex interaction between the LCT threshold and novated leasing—requires precision. For a financial move this significant, generic estimates won’t cut it.

Do you qualify? What is the actual dollar-for-dollar saving on a BYD Seal versus a traditional car loan? And what happens when your lease ends?

We urge you to try chatting with the EV Evolution AI-powered chatbot today. It is loaded with the 2025-26 FY tax tables, the exact LCT threshold ($91,387), and real-time EV pricing data to give you a definitive answer.

Start the conversation now:

• “Calculate my FBT saving on a Kia EV6 Air with my $150,000 salary.”
• “Give me a novated lease vs. outright purchase breakdown for a Tesla Model Y in NSW.”
• “Which accessories on the BMW iX1 will push it over the FBT threshold?”

About EV Evolution

EV Evolution is the leading online platform dedicated to Australian electric vehicle owners and enthusiasts. We foster a vibrant community, delivering essential EV news and insights, and enhancing user engagement through our innovative, AI-powered chatbot for dynamic discussions. Our mission is to empower Australian electric vehicle owners and enthusiasts by fostering a vibrant, AI-driven online community that connects, informs, and advances the nation’s electric vehicle landscape.