We're ordering an EV through the business — is the FBT exemption still there? The draft law went out for consultation on 11 September

The quote from the dealer has one line in it that does most of the selling: no FBT. The car is a battery electric, the salary packaging company has already run the numbers, and the only real question left is whether to sign this month or wait for the model that lands in autumn. Waiting is usually harmless. This time the concession has dates attached to it.

On 11 September 2026 Treasury opened consultation on exposure draft legislation under the title 'Sustainable fringe benefits tax treatment of electric cars'. It closes on 28 September 2026. Nothing in it is law. But it is the first time the numbers announced back in May have been written out as legislation, which makes this a sensible moment to be clear about both sets of rules — the ones that apply now, and the ones that would apply from 2027.

What the exemption gives you today

The electric car exemption means an employer does not pay fringe benefits tax on the private use of an eligible electric car provided to a current employee or their associates — family members, in practice. The ATO sets four conditions and all of them have to be met: the car is a zero or low emissions vehicle; the first time it is both held and used is on or after 1 July 2022; it is used by a current employee or their associates; and luxury car tax has never been payable on the importation or sale of the car.

Zero or low emissions vehicle has a narrower meaning than the phrase suggests. It covers a battery electric vehicle or a hydrogen fuel cell electric vehicle, and it has to be a car designed to carry a load of less than one tonne and fewer than nine passengers including the driver. Motorcycles and scooters are not cars for FBT purposes and do not qualify even when they are electric. Plug-in hybrids stopped counting as zero or low emissions vehicles from 1 April 2025, although the exemption can continue in certain conditions for arrangements already in place.

Two details inside the exemption matter more than people expect. Benefits provided under a salary packaging arrangement are included, and so is the cost of the fuel — meaning the electricity — used to charge the car. The ATO has also said the government will complete a review into this exemption by mid-2027 to consider electric car take-up, which is the context the May announcement came out of.

What was announced, and where it has got to

On 5 May 2026, as part of the 2026–27 Federal Budget, the government announced what the ATO describes as fairer tax treatment to encourage affordable EVs. The shape of it is a taper rather than a cliff.

The existing electric car discount continues in full until the end of March 2027. Between 1 April 2027 and 1 April 2029, electric cars costing $75,000 or less continue to be eligible for a 100% discount on FBT, implemented through a 0% rate in the FBT statutory formula; electric cars costing more than $75,000 but below the luxury car tax threshold receive a 25% discount on their payable FBT, implemented through a 15% statutory formula rate. From 1 April 2029 onwards, all electric cars below the LCT threshold receive the 25% discount. Existing leases were specifically said not to be impacted by these changes.

The statutory formula is worth one sentence of explanation, because the whole mechanism runs through it. It is the ordinary way most car fringe benefits are valued: the base value of the car multiplied by a statutory percentage — currently 20% — pro-rated for the days in the FBT year the car was available for private use, less any employee contribution. Setting that percentage to 0% produces no taxable value at all. Setting it to 15% produces three-quarters of the ordinary one. Nothing else in the calculation changes.

The ATO's page on this measure, last updated 14 May 2026, ends with a sentence that should govern any decision made this month: this measure is not yet law. An exposure draft is the step between an announcement and a bill, not the end of the process.

'Exempt' does not mean 'invisible'

This is the assumption that costs people the most, and it has nothing to do with the changes — it is true of the exemption as it stands today. The ATO states it plainly on the same page that grants the exemption: the private use of an eligible electric car and the electricity to charge it are exempt from FBT, however the benefit is reportable.

What that means in practice: if the fringe benefits you receive have a total taxable value of more than $2,000 in an FBT year — 1 April to 31 March, not the income year — your employer reports the amount to the ATO. That reportable fringe benefits amount is grossed up to reflect the pre-tax income you would have had to earn, at the highest marginal tax rate plus the Medicare levy, to buy the benefit yourself. It shows on your income statement in ATO online services through myGov, or on your payment summary. You are not taxed on it, and a return lodged through an agent or myTax generally pre-fills it.

But it is included in income tests for some government benefits and obligations. So a benefit that has been described as tax-free at every step of the sales conversation can still move a number somewhere else in the household. That is not an argument against doing it. It is an argument for knowing the figure before the FBT year closes on 31 March rather than discovering it in an income test afterwards.

'Under the luxury car threshold' is not one number

There are two LCT thresholds each year, one for fuel-efficient vehicles and one for other vehicles. For 2026–27 they are $91,661 and $80,809 respectively. Electric cars are tested against the fuel-efficient figure. The definition of a fuel-efficient vehicle changed from 1 July 2025 under the Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025, which also aligned the indexation applying to the two thresholds.

The condition in the exemption is also not quite 'the price is under the threshold'. It is that LCT has never been payable on the importation or sale of the car. That brings the car's history into it, not only what this buyer paid — which is the part that catches people looking at a used import or a demonstrator.

And the $75,000 in the announcement is a new line that does not exist anywhere in the law today. Precisely where it sits — what is counted in the cost, and whether it is indexed — is the kind of question an exposure draft exists to settle, and the reason the consultation closing on 28 September is not a formality.

If a decision about an electric car is live in the next few months, the general point is that the calendar is doing more work than usual. On the announcement as it stands the full discount runs to the end of March 2027, existing leases were said not to be affected, and none of it is law yet. Those three facts together argue for knowing the delivery date as precisely as the price.

This is general information current as at 13 September 2026, not advice about a particular vehicle, lease or salary packaging arrangement. Where a car sits inside a company or trust, or is being packaged through payroll, the FBT return and the reportable amount are both ordinary compliance work — and that is what our service for companies, trusts and bookkeeping is built around.