Draft laws unveiled for EV FBT changes

The federal government has released draft legislation, the Treasury Laws Amendment Bill 2026: Phased Changes to the FBT Electric Car Exemption, which details how the fringe benefits tax (FBT) treatment of electric vehicles (EVs) will change under measures announced in the budget.

In May this year, Treasurer Jim Chalmers and Minister for Climate Change and Energy Chris Bowen announced that the government would change the FBT exemption for EVs, including transitioning to a permanent 25 per cent discount on FBT for these cars. It said existing leases will not be impacted by the changes.

The changes were informed by the Electric Car Discount Review, which found the scheme had encouraged EV uptake, reduced emissions, and softened some of the impact of global oil price fluctuations.

However, it also pinpointed concerns about the exemption’s increasing fiscal cost and distributional effects. In response, the government said it warranted recalibrating the concessions as the electric car market matures.

The amendments have taken a phased approach to the FBT treatment of EVs provided by employers to current employees to support the transition from internal combustion engine vehicles to electric cars. The government said this would also make the concession “fairer and more fiscally sustainable”.

“The phased implementation also gives affected taxpayers a clear transition path and reduces the risk of market disruption associated with abruptly withdrawing electric car incentives,” the government said in the explanatory material of the draft legislation.

The bill amends the Fringe Benefits Tax Assessment Act 1986 to transition the FBT treatment of electric cars that meet certain eligibility criteria from being exempt from FBT to instead be subject to a concessional FBT treatment.

This transition period will span from 1 April 2027 to 31 March 2029 and will have three periods:

• Eligible electric cars that are provided to employees by their employers under commitments made before 1 April 2027 can be exempt from FBT (from 1 July 2022 to 31 March 2027).
• EVs that are provided before 1 April 2029 can access either a 100 per cent or 25 per cent FBT discount (from 1 April 2027 to 31 March 2029).

However, EVs that are provided under commitments made on or after 1 April 2029 can only access a 25 per cent FBT discount.

“To ensure that eligible electric cars subject to commitments made during the period 1 July 2022 to 31 March 2027 are not disturbed by the amendments… the bill contains transitional arrangements that preserve the FBT exemption until the commitment under which the electric car is provided ceases,” the government said.

How the phases will work

Under the proposed new law, electric cars that meet certain eligibility criteria and are provided by an employer to their employee as a car benefit under a commitment made on or after 1 April 2027 receive concessional FBT treatment. The level of concession will depend on:

• When the employer made the commitment to provide the car benefit.
• The base value of the car at the time the employer first holds the car provided to the employee or associate.
  

To receive the 100 per cent FBT discount, the eligible car must:

• Be provided to the employee by their employer as a car benefit under a commitment made on or after 1 April 2027 and before 1 April 2029.
• Have a base value of $75,000 or less at the time the employer first holds the car provided to the employee.

To receive a 25 per cent FBT discount, the eligible car must:

• Be provided to the employee by their employer as a car benefit under a commitment made on or after 1 April 2027
• Have a base value of more than $75,000 but not more than the fuel-efficient limit.
• An eligible electric car must have a base value of not more than the fuel-efficient car limit at the time the employer first holds the car provided to the employee as a car benefit, the explanatory material stated.

The government is seeking feedback on the proposed laws in the draft legislation document, with submissions closing Monday, 28 September 2026.