The Proposed Electric Vehicle FBT Exemption Timeline for Businesses

Written by: Damon Jones, Accounting & Tax (Updated: 17 September 2026)

Navigating the draft legislation, phase-out periods, and compliance requirements for employer-provided electric cars.

For employers across the Sunshine Coast and beyond, providing an electric car to staff has been an attractive salary packaging option. However, the Federal Government has released draft legislation proposing a phased reduction of these concessions. Navigating the proposed electric vehicle FBT exemption timeline is crucial for businesses evaluating novated leases. This article outlines the transitional rules under Commonwealth law, which applies Australia-wide, to help you prepare for the upcoming changes.

What Is the Proposed Electric Vehicle FBT Exemption Timeline?

The federal government recently reviewed the Electric Car Discount policy. While the review found the initial discount successfully accelerated fleet adoption, it also raised concerns about ongoing costs to federal revenue. Following this review, Treasury has proposed a firm timeline to phase out the current concessions.

For businesses planning fleet renewals, the draft legislation sets a transition date of 1 April 2027. These reforms remain in draft form while Treasury consults on the changes, with submissions due by 28 September 2026.

Arrangements for existing PHEV novated leases are protected if you enter into a financially binding commitment before the April 2027 cutoff. Eligible agreements established before this date will continue to receive the full Fringe Benefits Tax EV exemption for the life of the commitment. To maintain this status, you must ensure:

The novated lease or financial commitment is fully executed prior to 1 April 2027.
The vehicle arrangement continues to meet all current ATO electric car exemption guidelines.
No material variations are made to the contract terms after the transition date.

Any new agreement signed on or after 1 April 2027 will fall under the revised taxation framework.

How the Electric Vehicle FBT Exemption Timeline Impacts Value Thresholds

The conclusion of the EV FBT exemption in Australia depends on the vehicle’s base value and the commencement date of the agreement. Under the proposed novated lease FBT exemption changes, new arrangements entered into between 1 April 2027 and 31 March 2029 follow a tiered discount system based on vehicle cost.

Eligible electric vehicles with a base value of $75,000 or less receive a 100% discount.
Vehicles priced over $75,000 but under the applicable fuel-efficient limit receive a 25% discount.

Applying this second tier requires confirmation of the luxury car tax threshold for EVs in Australia for the relevant financial year. Vehicles exceeding this threshold do not qualify for the exemption. From 1 April 2029 onwards, new agreements will receive a permanent 25% discount, replacing the full exemption entirely.

Plug-in hybrid electric vehicles (PHEVs) operate under a distinct schedule. The general exemption for PHEVs concluded on 1 April 2025 under section 8A of the Fringe Benefits Tax Assessment Act 1986 (Cth). Current commitments established before that date remain exempt while the agreement remains unchanged.

Any modifications to those existing PHEV contracts may trigger the new taxation rules.

FBT Record Keeping Requirements and Time Limits

Precise documentation is required for employers providing car benefits to staff. Under ATO rules, the statutory requirement for record retention is five years.

Section 132 of the Fringe Benefits Tax Assessment Act 1986 (Cth) stipulates that this five-year retention period applies to all employee declarations, logbooks, and calculations. The clock starts from the date your FBT return is lodged.

Requirements for documentation extend to the capital cost of the vehicle. The car limit under section 40-230 of the Income Tax Assessment Act 1997 (Cth) restricts the maximum tax depreciation claimable on passenger vehicles. Retaining original purchase invoices, financing documents, and depreciation schedules is necessary to substantiate the vehicle’s base value, as missing records may result in denied deductions.

The FBT year runs from 1 April to 31 March, requiring businesses to gather records for lodgement at the end of this cycle. Standard FBT return due dates generally fall on 21 May for paper lodgement, or 25 June if lodging electronically through a registered tax agent. Meeting these deadlines across Australia minimises the risk of facing late lodgement penalties.

Internal processes should be configured to capture:

Odometer readings at the start and end of the FBT year
Valid logbooks kept for a continuous 12-week period
Employee declarations signed before the return is lodged

If your business requires Sunshine Coast FBT tax return help, our Accounting & Tax team can assist with preparation and lodgement. Early advice clarifies what evidence you need to gather.

Key Takeaways

The proposed schedule for electric vehicle FBT changes introduces a staged reduction of concessions starting in 2027, transitioning to a permanent 25% discount by 2029. While existing arrangements are generally protected, businesses must navigate the new base value thresholds and strict ATO compliance deadlines. Preparing for these transitions assists your business in meeting its Commonwealth tax obligations. Engaging a registered tax agent is highly recommended to ensure compliance with these evolving requirements.

Sources

Disclaimer: This article provides general information only and does not constitute financial advice. It does not take into account your personal circumstances and should not be relied on as a substitute for professional financial advice. This article contains general tax information only. Tax outcomes depend on individual circumstances. You should seek advice from a registered tax agent before making financial decisions. For advice about your specific situation, please contact Greenhalgh Pickard on (07) 5444 1022 to speak with our accounting team.