If you're considering purchasing an electric car for your team, there are two questions you need to ask.
1. Does the FBT break still apply?
2. How long will it last?
The answer to both questions matter, because Australia’s move to electric vehicles has happened fast. The country now has around 500,000 fully electric vehicles on the road, up from about 27,000 in 2021. Now the tax settings that helped drive that growth are starting to change.
For the 2026-27 financial year, that means knowing which cars still qualify, what's changing and when, how home-charging costs work under the latest ATO rate, and the records you owe even while a car is exempt.
What the EV FBT exemption covers
The EV FBT exemption is an Australian tax concession that removes fringe benefits tax on eligible electric cars and their running costs when an employer provides them to an employee for business and private use.
Introduced in July 2022, the EV FBT exemption reaches beyond the car itself. Once a vehicle qualifies, these running costs are also exempt:
- Registration
- Insurance
- Repairs and maintenance
- Electricity for charging
This extent of reach is the reason the concession makes such a difference to the cost of putting an EV in front of an employee, especially through a salary sacrifice arrangement.
Is the EV FBT exemption ending, and what's changing?
Yes, the EV FBT exemption is changing on a staged timeline.
Here's the schedule from the government’s May 2026 announcement:
- The full exemption continues unchanged until 31 March 2027.
- From 1 April 2027 to 1 April 2029, the full exemption would apply only to EVs valued at $75,000 or less. EVs valued above $75,000 but below the fuel-efficient luxury car tax threshold would get a 25% discount on the FBT that would otherwise apply.
- From 1 April 2029, all eligible EVs below the threshold would move to the 25% discount, and the full exemption would end.
However, existing leases won't be affected by the change. An arrangement you enter into while the full exemption applies, keeps its treatment.
How the EV FBT exemption winds down
The full exemption is the most generous it will be. The government has announced a staged wind-back from 2027.
Now to 31 Mar 2027
Full exemption
Every eligible battery electric and hydrogen fuel-cell car under the luxury car tax threshold is fully exempt from FBT.
1 Apr 2027 to 1 Apr 2029
Capped at $75,000
Full exemption only for EVs priced $75,000 or less. EVs above $75,000 but under the threshold get a 25% FBT discount.
From 1 Apr 2029
Discount only
The full exemption ends. All eligible EVs under the threshold get a 25% FBT discount instead.
Announced by the Australian Government in May 2026 and subject to legislation. Existing leases won't be affected by the changes.
For a business planning vehicle purchases across the next few years, what matters most is timing. The most generous version of this concession is available now, through the 2026-27 FBT year.
Who still qualifies in 2026-27?
Not every low-emissions car makes the cut. To be exempt under the ATO's electric cars exemption rules, a vehicle has to meet the following criteria:
- Type: The car must be a battery electric vehicle or a hydrogen fuel-cell electric vehicle. Plug-in hybrids no longer qualify.
- Value: Its GST-inclusive value has to sit under the fuel-efficient luxury car tax threshold, which is $91,661 for 2026-27
- No luxury car tax: The car must never have had luxury car tax applied.
- First use: It has to have been first held and used on or after 1 July 2022.
- Who uses it: A current employee or an associate, such as a family member, has to be the one using it.
Since 1 July 2025, the definition of a fuel-efficient vehicle tightened to 3.5 litres per 100km or less, down from 7. That change matters mostly for the value test, so check it against a specific model before you commit.
What happened to plug-in hybrids?
Plug-in hybrids lost their place in the exemption on 1 April 2025. But, if a PHEV sits under a financially binding agreement, such as a lease, before 1 April 2025, the exemption keeps running until that agreement ends. Optional extensions made after that date don't count, so a lease extended past its original term won't carry the exemption into the extension.
If your team still runs plug-in hybrids under older agreements, note the end dates now so a tax bill doesn't catch you out later. The ATO's guidance on plug-in hybrids sets out the transitional rule in full.
Home charging costs and the ATO shortcut rate
Charging at home is where reimbursement gets tricky. The household electricity bill rarely separates the car charging from appliance operation. The ATO's Practical Compliance Guideline PCG 2024/2 solves this with a flat shortcut rate.
That rate changed recently from 4.2 cents to 5.47 cents per kilometre.
- 1 April 2026 for FBT
- 1 July 2026 for income tax
For example, an EV driven 15,000 business kilometres in a year works out to about $820 of reimbursement at the 5.47 cent rate (15,000 multiplied by $0.0547). Treat that as illustrative, since your own figure depends on actual kilometres travelled.
You've got three ways to work out charging costs:
- The shortcut rate. Apply the cents-per-kilometre figure to the kilometres travelled.
- Actual cost. Track and calculate the real electricity expense, which needs proper metering or records.
- A combination. Where you can show the split between home and commercial charging, apply the shortcut rate to the home portion and claim commercial charging on top.
The ATO has also added a method for plug-in hybrid home charging, so the shortcut no longer sits with fully electric vehicles alone.
The records you still owe
This is the part employers miss most. A car being exempt doesn't make the paperwork go away.
You still need to:
- Keep odometer readings at the start and end of each FBT or income year.
- Hold on to records for five years.
- Keep electricity bills if you use the actual-cost method for charging.
The value of the car benefit still counts toward the employee's Reportable Fringe Benefits Amount, even while the car is exempt from FBT. That figure feeds into things like the Medicare levy surcharge and family assistance payments, so it's more than a formality.
Ready to get your EV mileage records in order?
Start your free trial and see how much of the tracking runs itself.
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Salary sacrifice for an electric car
Salary sacrifice, or salary packaging, is an arrangement where an employee gives up part of their pre-tax salary in exchange for a benefit, like an electric car. Because the deductions come out before tax, the employee's taxable income drops, and so does the income tax and Medicare levy they pay.
The FBT exemption is what makes this work so well for EVs. With no FBT on an eligible car, the employer isn't left carrying a tax cost on the benefit, and the full pre-tax saving flows through to the employee. Several Australian providers run packaging schemes built specifically around electric cars.
The wind-back timeline is the reason to move deliberately. An arrangement set up while the full exemption applies locks in that treatment, and the announcement indicates existing leases stay put. If a packaged EV is on your radar, the maths is friendliest before the caps arrive. If you're weighing this against a cash alternative, our guide to car allowance in Australia walks through the trade-offs.
Track mileage and EV costs with Timeero
Timeero is a field workforce visibility platform that automatically tracks employee time, mileage, and job activity with GPS precision. For EV record-keeping, a few features do the heavy lifting.
Automatic mileage tracking. Timeero records business mileage using GPS while an employee is clocked in. Timeero works offline too, capturing mileage where there's no signal and syncing once a connection returns.
Custom mileage rate. You can set the per-kilometre rate to match the ATO figure, so reimbursements line up with the shortcut method without a spreadsheet.
Route replay with breadcrumbs. Every trip plays back with timestamps, which makes a claim easy to review and stand behind.
Segmented Tracking. For drivers who make multiple stops each day, Timeero’s Segmented Tracking breaks the day into segments, showing the time and distance for each leg.
Payroll export. Timeero exports to Xero Australia, so mileage reimbursement flows into your pay run.
If you want to capture extra costs like tolls or parking, you can use Custom Fields to collect this information at clock-in or clock-out.
If you're comparing tools, our roundup of the best mileage tracking apps puts Timeero next to the main alternatives.
Protect your EV FBT savings with Timeero
The EV FBT exemption is still one of the better reasons to put an electric car in front of an employee. Make sure you know whether your vehicle qualifies this financial year, watch the 2027 and 2029 milestones, and treat your mileage and charging records as the thing that makes the concession hold up.
Once you have the groundwork right, the savings look after themselves.
See how Timeero handles mileage tracking in our Timeero review, or start your free trial today.
Frequently asked questions
Does the EV FBT exemption apply to used or second-hand electric cars?
It can. A used EV still has to meet the eligibility criteria : a battery or fuel-cell vehicle, a value under the fuel-efficient luxury car tax threshold, and no luxury car tax ever applied. The catch is the first-use date. The car has to have been first held and used on or after 1 July 2022, so an EV first used before that date won't qualify even second-hand.
What happens to my existing novated lease when the exemption changes?
The announced changes indicate existing leases won't be affected. An arrangement entered into while the full exemption applies keeps that treatment, even as the caps and discounts phase in for new arrangements from 2027.
Why is the EV FBT exemption being wound back?
A Treasury review of the scheme, published in May 2026, found the exemption worked in its early years, adding an estimated 64,000 battery electric vehicle sales over its first three years, but that its cost is climbing fast, from a forecast $1.35 billion in 2025-26 to $2.8 billion by 2028-29. It also found the benefit skews toward higher earners and people who can access salary packaging, and that EV prices are falling to the point where more buyers will go electric without the incentive. The review recommended a clear, graduated phase-down rather than an abrupt end, and the government's announced dates are its response to that. The government estimates the change will save the Budget $1.7 billion over five years.
Do I pay FBT if my electric car costs more than the threshold?
Yes. An EV valued over the fuel-efficient luxury car tax threshold of $91,661 for 2026-27 falls outside the exemption, and the usual FBT rules apply to the benefit. The value is GST-inclusive and counts accessories fitted at the time of sale.
Are plug-in hybrids still exempt from FBT?
Not anymore. PHEVs stopped qualifying on 1 April 2025. The one exception is a plug-in hybrid under a binding financial agreement entered before that date, which keeps the exemption until the agreement ends.
How do I reimburse an employee for charging an EV at home?
Use the ATO's shortcut rate under PCG 2024/2, which is 5.47 cents per kilometre from 1 April 2026. Multiply it by the kilometres travelled, or track actual electricity costs if you'd rather. Either way you'll need odometer readings, plus electricity bills for the actual-cost method.
Do I still need to keep records if my EV is FBT exempt?
Yes. Keep odometer readings at the start and end of each year, and hold records for five years. The car benefit also counts toward the employee's Reportable Fringe Benefits Amount even when it's exempt, so the reporting doesn't go away.
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