The short answer
- I already have an EV on a novated lease. Under the draft, a car provided under a commitment made before 1 April 2027 stays exempt until that commitment ceases. Refinance it, change the lease term or residual, or change employers, and it is a new commitment, subject to the new discounts.
- I am signing between April 2027 and March 2029. At a base value of
$75,000 or less, Treasury’s consultation page puts it this way:
Eligible EVs valued at $75,000 or less will still get an 100 per cent FBT exemption where the commitment to provide a vehicle is made before 1 April 2029.
Above $75,000, up to the luxury car tax limit for fuel-efficient cars, a 25 per cent discount. - I am signing from April 2029. The 25 per cent discount, whatever the car is worth, up to that limit.
- Is this law? No. It is an exposure draft. Consultation ran from 11 to 28 September 2026.
Which period your car falls in
The draft turns on one date: when the commitment to provide the car was made. The
explanatory materials describe three distinct periods for the FBT treatment of an eligible
electric car provided as a car benefit
, and the line between them is the commitment, not
the day the car is delivered or the start of a tax year.
Exempt from FBT, until the commitment under which the car is provided ceases.
Base value $75,000 or less: a 100 per cent discount. Above that, up to the fuel-efficient car limit: 25 per cent.
A 25 per cent discount for every eligible car committed from this date, up to the fuel-efficient car limit.
The three periods as the exposure draft explanatory materials set them out (paragraphs 1.1, 1.2 and 1.41), by the date of the commitment to provide the car. The draft’s eligible cars are battery electric and hydrogen fuel cell vehicles.
A 100 per cent discount committed in the bridge period lasts, too. Part 2 of the draft, which removes the 100 per cent option from 1 April 2029, does not apply to a car provided under a commitment made before that date. So a $70,000 car committed in, say, mid-2028 stays fully discounted for as long as that commitment runs.
What share of the car’s value is taxed
The draft works through the statutory formula, one of two ways to value a car fringe
benefit (the other, the operating cost method, is not changed). The formula takes a fraction
of the car’s base value, scaled to the days in the year the car was provided. That
fraction is 0.2 today. The draft keeps 0.2 as
the default and reduces it for eligible electric cars: by 100 per cent to nothing, or by 25
per cent, which the explanatory materials say makes the taxable value 15 per cent of the
electric car’s base value (reduced from the default 20 per cent rate)
. The formula
then subtracts anything the employee pays toward the benefit.
Statutory fractions 0, 0.15 and 0.20 from the table at paragraph 1.41 of the exposure draft explanatory materials, shown as a share of base value; each bar is drawn to a full width of 20 per cent. Applies to cars committed from 1 April 2027 that are provided to a current employee. Cars committed before 1 April 2027 stay exempt until the commitment ceases.
Two details matter for a household. Base value is determined at the time the employer first
holds the car, and the explanatory materials say the calculation takes into account non-business
accessories fitted on or around the time of purchase. And the employee’s reportable
fringe benefits amount is still worked out as if the fraction were 0.2, which the explanatory materials describe as the same outcome as under the
previous subsection 135P(3)
.
The $75,000 line is a step, not a slope
Over the bridge period the draft gives a car at $75,000 a 100 per cent discount and a car one dollar dearer 25 per cent. On the formula above, before any employee contribution and for a full FBT year, that is the difference between a taxable value of nothing and about $11,250. The explanatory materials use a $90,000 car as an example of one under the 2026-27 fuel-efficient car limit, which they put at $91,661, and a $95,000 car as one over it.
$0
Taxable value a year, base value $75,000, committed 1 April 2027 to 31 March 2029.
Our arithmetic, draft fraction 0
$11,250
Taxable value a year, base value $75,001, same period: 0.15 of the base value.
Our arithmetic, draft fraction 0.15
$13,500
Taxable value a year for the explanatory materials’ $90,000 example, under the limit, so 0.15.
Our arithmetic, draft fraction 0.15
$19,000
Taxable value a year for their $95,000 example, over the $91,661 limit, so the full 0.20.
Our arithmetic, default fraction 0.2
Base value multiplied by the statutory fraction, for a car provided every day of a full FBT year (1 April to 31 March), before subtracting any payment by the employee. The $11,250 figure is rounded from $11,250.15. Taxable value is not the tax: FBT is the employer’s liability, charged on that value, and how it reaches your pay depends on your package.
What counts as a new commitment
Fringe benefits law does not define a commitment, the explanatory materials say, so they
borrow a 2011 explanation: a commitment is entered into at the point that there is a commitment to the
transaction, and it cannot be backed out of
. They then list what counts as a new
commitment for the same car, and say that in each case the exemption will cease and the car
benefit will instead be subject to the applicable FBT concession
.
A new commitment for the same car, per the explanatory materials
refinancing the car
- altering the terms of an existing contract, such as
the lease term or residual value
- fitting accessories to a leased car if lease payments increase as a result
changing employers even if the employers are within the same corporate group
- an employee moving to another government department while ownership of the car stays the same
Paragraph 1.11 of the exposure draft explanatory materials. Paragraph 1.28 adds that a commitment ceases when an employee leaves their employment, and a lease on the same car with a new employer is a new commitment under the settings of that date.
Renewing a novated lease on the same car is a new commitment too: the explanatory materials work through a lease that ends and is renewed on the same car, with different percentages applying either side of the renewal. They also warn against the obvious workaround:
Exposure draft explanatory materials, paragraph 1.13
Employers and employees who seek to end existing commitments early and immediately enter into new commitments just to maintain the FBT exemption provided under section 8A may be caught by the general anti-avoidance provisions.
Why, and where the draft stands
The change follows the statutory review of the electric car discount, conducted by the
Australian Centre for Evaluation in Treasury and the Department of Climate Change, Energy, the
Environment and Water, whose final report was released on 5 May 2026. It put the tax
expenditure from the exemption at an estimated $2.0 billion over its first three years,
2022-23 to 2024-25, forecast $1.35 billion in 2025-26, and said that is expected to grow to
$2.8 billion in 2028-29 based on the current trajectory and policy settings
. Its recommendation:
Statutory Review of the Electric Car Discount, final report, May 2026, p. 5
it is recommended that the Government consider changes to better manage the costs of the ECD
- 5 May 2026Review final report released; concurrently, the Treasurer and the Minister for Climate Change and Energy announce the changes, in the lead-up to the 2026-27 Budget.
- 11 to 28 September 2026Treasury consults on the exposure draft and explanatory materials.
- 8 October 2026No bill yet: the newest bills on the Parliament’s list are dated 17 September.
- 1 April 2027Part 1 would apply to car benefits provided from this date. It commences on the later of 1 April 2027 and the first quarter day after Royal Assent, and applies back to 1 April 2027 if Royal Assent comes after it.
- 1 April 2029Part 2 would remove the 100 per cent discount for commitments made from this date.
Dates from Treasury’s consultation page, the exposure draft’s commencement table and paragraphs 1.4 and 1.55 to 1.61 of its explanatory materials, and the Parliament’s bills list, read 8 October 2026 and sorted newest first.
A draft can change before it becomes a bill, and a bill can change in Parliament. We will report when a bill carrying these changes is introduced, and what differs from the draft.
Our view
This is opinion, built on the documents above. Treasury has handled the people already in a lease fairly: the exemption they signed up for is preserved for as long as the commitment lasts, and the 100 per cent rate for cars at $75,000 or less carries to 2029 and then runs with each commitment. Given a review expecting the annual cost to grow from $1.35 billion to $2.8 billion in three years, recalibrating the concession is a defensible call, and a 25 per cent discount is still a real one.
The weak spot is the definition of a new commitment, because it catches ordinary life as well as gaming. The anti-avoidance warning is aimed at people ending leases early to lock in the exemption. But the list also includes changing employers, and paragraph 1.28 makes it explicit that leaving a job ends the commitment. For a car over $75,000, someone who signs before April 2027 and changes jobs after it can move from exempt to the 25 per cent discount, a taxable value of 15 per cent of base value. After April 2029, a new commitment on any eligible car gets only that 25 per cent. A household weighing a lease now should read it as exempt until the job, the finance or the contract changes, not for the full term regardless.
The step at $75,000 deserves the same caution. Base value counts non-business accessories fitted around the time of purchase, so a car priced just under the line can cross it on its options. Get the base value in writing before you sign.