EV FBT Exemption Changes 2027: What You Need to Know Before the Deadline

If you're weighing up an EV novated lease, there's a hard deadline worth knowing about: the Fringe Benefits Tax (FBT) exemption that makes EV novated leases so much cheaper than a standard car loan is phasing down, starting 1 April 2027. Here's exactly what changes, and when.

The three phases at a glance

• Now until 31 March 2027 ("Phase 1"): eligible EVs get a full FBT exemption, for the whole term of the lease.
• 1 April 2027 to 31 March 2029 ("Phase 2"): EVs priced at $75,000 or under keep the full exemption. EVs priced above $75,000 drop to just a 25% exemption.
• From 1 April 2029 ("Phase 3"): the exemption flattens to 25% for all eligible EVs, regardless of price.

What "FBT exemption" actually means for your lease

A novated lease lets you pay for a car out of your pre-tax salary. Normally, an employer-provided car benefit like this attracts Fringe Benefits Tax, but eligible EVs are exempt, which is what makes the pre-tax savings so large. The bigger the exemption, the more of your lease payment comes out of pre-tax income instead of post-tax income, and the bigger your tax saving.

As the exemption shrinks from Phase 1 to Phase 2 to Phase 3, more of your lease cost has to be paid as a post-tax contribution to avoid an FBT liability, which means smaller pre-tax savings, and a higher total cost over the life of the lease.

Why the $75,000 threshold matters

Phase 2 doesn't remove the exemption for everyone: it splits eligible EVs into two groups by price. A sub-$75k EV genuinely has nothing to fear from Phase 2: it keeps the full exemption exactly as it has under Phase 1. It's only EVs priced above $75,000 that drop to the reduced 25% rate. (This is a separate number from the luxury car tax eligibility threshold, which sits around $91,661 for 2026–27. A car has to be under that just to qualify for any exemption at all, BEV or hydrogen fuel-cell only. We'll cover that distinction properly in a follow-up post.)

Does locking in a lease now protect you?

Yes, a lease signed before 1 April 2027 keeps its full exemption for its entire term, even as the rules tighten around new leases signed after that date. That's a real, meaningful reason to think about timing, and it's worth its own detailed look at how to weigh that decision.