EV Tax Perks Are Shrinking: What the FBT Changes Mean for Northern Beaches Businesses and Novated Leases

If you're a Northern Beaches business owner considering an electric vehicle through a novated lease, or you're an employee weighing one up through salary packaging, the tax treatment behind that decision is changing, and the timeline matters more than it might seem right now.

What the current exemption actually is

Right now, eligible electric vehicles under the fuel-efficient luxury car tax threshold qualify for a full Fringe Benefits Tax exemption, which is a large part of what's made EV novated leases and salary packaging so attractive over the past few years. That full exemption stays in place, unchanged, through 31 March 2027.

What happens after that

From 1 April 2027 to 31 March 2029, the exemption narrows. EVs valued at $75,000 or less keep the full exemption, but EVs priced above $75,000 (and still below the luxury car tax threshold) only get a 25% FBT discount instead of a full exemption. The $75,000 cap is specifically aimed at keeping the incentive focused on more affordable models rather than premium vehicles.

From 1 April 2029 onward, the full exemption disappears altogether. Every eligible EV under the luxury car tax threshold moves to a flat 25% FBT discount, regardless of price.

One important protection: the government has confirmed that existing leases won't be affected by these changes. If you've locked in a novated lease under the current full exemption, that arrangement keeps its current tax treatment for its term.

What this means for the decision in front of you now

If a business or an individual is genuinely considering an EV through a novated lease or salary packaging arrangement, there's a real, dated window (through March 2027) where the current full exemption still applies to a new lease. After that, the maths on higher-value EVs in particular gets noticeably less favourable, and by 2029 the full exemption is gone for everyone.

This isn't a reason to rush a decision that doesn't otherwise make sense for your business, but if an EV was already on the table, the current settings are the most generous they're going to be.

Where charging and solar fit in

Whether it's one vehicle or a small fleet, the value of an EV goes up considerably when it's charged with power you've already generated rather than at retail electricity rates or a public charger. For a business with daytime solar generation and staff or fleet vehicles parked on site during the day, a properly sized workplace EV charger is often the single best use of that midday solar output, particularly with feed-in tariffs for exported solar as low as they currently are in NSW.

Weighing up an EV for your business or considering workplace charging? Get in touch with Power & Solar Group and we'll help you work out whether a charger, paired with your existing solar, makes sense for your site.

Source: PwC Australia.