Electric vehicles accounted for 13.1% of all new car sales in Australia in 2025 — up from 9.6% the year before — driven in no small part by the Federal Government's Electric Car Discount, introduced in mid-2022. For many businesses and employees, it has materially reduced the cost of owning or leasing an EV. That concession is now under formal review.

While no immediate changes are proposed, this is a good moment to understand how the concession works, what the review means for your planning, and what to check before committing to a new arrangement.

How the Electric Car Discount works

The concession operates through three tax mechanisms:

• FBT exemption: Where an eligible EV is provided to an employee as a fringe benefit, typically through a novated lease or salary packaging, private use is exempt from Fringe Benefits Tax. Without the exemption, FBT can apply at up to 47%. The saving for an employee can be thousands of dollars per year.
• Higher luxury car tax threshold: Fuel-efficient vehicles qualify for a higher LCT threshold ($91,387 for 2025-26, compared to $76,950 for other vehicles), preventing the 33% LCT from applying to part of the purchase price.
• Customs duty exemption: Certain EVs are exempt from the standard 5% import duty, reducing upfront costs.

Important note: plug-in hybrid electric vehicles (PHEVs) lost eligibility for new FBT exemption arrangements from 1 April 2025. Only battery electric and hydrogen fuel cell vehicles qualify for new arrangements.

Why the review has been triggered

The statutory review was announced in December 2025 and is being conducted by the Australian Centre for Evaluation (within Treasury) and the Department of Climate Change, Energy, the Environment and Water. Public submissions closed on 6 February 2026 and a final report is due by mid-2027.

However, industry commentary and recent political signals suggest the Federal Budget, which is expected before the review formally concludes, may include earlier changes to the concession. The Government is understood to be considering a broader than usual range of options. This makes a wait-and-see approach riskier than the mid-2027 headline date implies.

What this means for your planning

No retrospective changes are expected, and existing arrangements are likely to be grandfathered. But nothing can be guaranteed until the review reports.

If you are considering an EV arrangement for yourself or for employees acting under the current rules gives you the greatest certainty. Key things to check before you proceed:

• Confirm the specific vehicle model is eligible. Only battery EVs and hydrogen fuel cell vehicles qualify for new arrangements after 1 April 2025.
• Check the vehicle is below the luxury car tax threshold for fuel-efficient vehicles at first purchase.
• Review the tax treatment of home charging infrastructure separately. This does not automatically attract the FBT exemption.
• Model the after-tax cost carefully, including the vehicle price, interest rate, residual value and running costs.
  

Should you act now?

The current rules are clear and legislated. For business owners and employees who have been considering an EV arrangement, there is no compelling reason to wait for the review to conclude. Please contact us for tailored advice on whether an electric vehicle strategy makes financial sense in your specific circumstances.

Please contact us if you have any questions - email us or phone our team on 02 9899 3044.