Is It Time to Review Your Electric Vehicle Strategy?
- Leah
- 3 hours ago
- 2 min read
With the Australian Electric Car Discount currently under review, is your business positioned to lock in the tax benefits before potential changes?
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Electric vehicles (EVs) have moved into the mainstream, now representing more than 8% of new car sales in Australia by the end of 2025. Much of this growth is due to government incentives—chief among them, the Federal Government’s Electric Car Discount introduced in 2022. However, the scheme is now under review.
How the Discount Currently Works
The incentive operates through tax concessions rather than direct payments, reducing the overall cost of acquiring and using an EV:
FBT Exemption: When an employer provides an eligible EV to an employee, private use is exempt from Fringe Benefits Tax (FBT)—offering savings of up to 47%. This can lower annual ownership costs by thousands of dollars. Note that the exemption applies to battery electric vehicles and hydrogen fuel cell vehicles. plug-in hybrids are excluded for new arrangements after 1 April 2025. The car must be first held and used after 1 July 2022 and be below the luxury car tax threshold at first purchase.
Higher LCT Threshold: EVs and fuel-efficient vehicles qualify for a higher LCT threshold—$91,387 in 2025–26. This helps avoid the 33% luxury car tax on the vehicle's purchase price.
Customs Duty Relief: Some EVs are also free from the 5% import duty, reducing the purchase price even further.
Why the Scheme Is Being Reviewed
The government is conducting a scheduled review largely due to the program’s budget impact—EV adoption has outpaced projections. The review will consider whether the incentive is still necessary and potential tightening of eligibility (such as limiting models or price ranges). A final report is expected by mid-2027, and any adjustments would likely apply prospectively.
What You Should Do Now
Despite future uncertainty, the current rules remain in place. Review fleet and salary packaging plans now, particularly if vehicle changes are expected within the next one to two years. Existing eligible vehicle leases and salary packaging agreements are likely to be grandfathered, meaning current benefits should continue (although we can’t guarantee this). Ensure vehicles stay below the LCT cap, and check whether employer-provided charging units qualify for the FBT exemption.
Our Advice
The Electric Car Discount remains one of the most valuable concessions available for employee vehicles. While a review introduces longer-term uncertainty, the commercial reality today is that EVs can deliver genuine tax and cash-flow savings when structured correctly.
If you are considering an EV—either personally or through your business—now is the right time to run the numbers. Please contact our team if you would like tailored advice on whether an electric vehicle strategy makes sense for you under the current rules.
Source of information: Current Australian Taxation Office (ATO) guidelines.
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