Australian Govt targets EV tax break to cheaper models in phased changes

The Australian Government will tighten its electric vehicle tax break to focus on more affordable models, while retaining support for buyers as the market matures.

In a joint statement, Treasurer Jim Chalmers and Climate Change and Energy Minister Chris Bowen say the changes to the fringe benefits tax (FBT) exemption for EVs are aimed at delivering “fairer and more financially sustainable” tax settings.

The current full FBT exemption will remain in place until March 31, 2027.

From April 1, 2027, the exemption will apply only to EVs priced at $75,000 or less, with higher-priced vehicles below the luxury car tax threshold receiving a 25% discount. From April 1, 2029, all eligible EVs under the threshold will move to a permanent 25% FBT discount.

The Government says the phased approach is designed to encourage manufacturers to bring more affordable EVs to market while continuing to support uptake.

“The new rules will encourage manufacturers to offer more affordable and cheaper to run EVs in the Australian market,” the ministers say.

Existing leases will not be affected by the changes.

The Government estimates the revised policy will save $1.7 billion over five years from 2025-26.

The move follows rapid growth in the EV market since the policy was introduced, with a wider range of lower-cost models now available.

“There were only two EVs under $40,000 – now there are around 10 and, for the first time, one model under $30,000,” the ministers say.

Electric and plug-in hybrid vehicles accounted for 22.9% of new car sales in March 2026, up from 1.8% in May 2022.

The Government says uptake has been strongest outside inner-city areas, including locations such as Gosford, Kellyville, Werribee and Toowoomba.

The changes follow a statutory review of the Electric Car Discount, which found the scheme had been effective in increasing EV uptake, reducing emissions and helping offset global fuel price pressures.

Eligible EVs will continue to be exempt from import tariffs.