If you are thinking about an electric car on a novated lease, the rules are about to change, and the date that matters is 1 April 2027. The full fringe benefits tax (FBT) exemption that has made EV novated leases so popular is being narrowed to cheaper cars, then wound back to a smaller permanent discount from 1 April 2029.
This guide sets out what is changing, what stays the same, and which cars land on each side of the new $75,000 line. We read every rule below on 13 November 2026 from Treasury, the Treasurer's second reading speech and the Australian Taxation Office (ATO), and every price from Tesla Australia's own configurator. This is general information, not tax or financial advice: get the numbers for your own lease in writing from your employer or lease provider.
The short version
| Period | EV valued at $75,000 or less | EV over $75,000, under the LCT line | EV over the LCT line |
|---|---|---|---|
| Now to 31 March 2027 | Full FBT exemption | Full FBT exemption | Not eligible |
| 1 April 2027 to 31 March 2029 | Full FBT exemption | 25 per cent FBT discount | Not eligible |
| From 1 April 2029 | 25 per cent FBT discount | 25 per cent FBT discount | Not eligible |
Two details sit behind that table. First, Treasury says an EV valued at $75,000 or less keeps the full exemption where the commitment to provide the car is made before 1 April 2029. Second, the Treasurer told Parliament that all eligible electric cars keep the FBT treatment that was in place when the last relevant commitment started. In plain terms, a lease you sign under today's rules keeps today's rules for the life of that arrangement.
What the rules are today
The ATO's electric cars exemption covers battery electric and hydrogen fuel cell cars that were first held and used on or after 1 July 2022, are used by a current employee or their associates, and have never had luxury car tax (LCT) payable on them. For the 2026 to 27 financial year the LCT threshold for fuel-efficient vehicles is $91,661 (the ATO's table, updated 1 June 2026). A car valued over that line has never been eligible, and that does not change.
Plug-in hybrids are already out. The ATO says a PHEV is no longer treated as a zero or low emissions vehicle for new arrangements from 1 April 2025, and only keeps the exemption where it was used or available before that date under a financially binding commitment. If you are weighing a PHEV against an EV, our plug-in hybrid explainer and hybrid vs electric guide cover the rest of that decision.
One thing the exemption never did: hide the benefit from your income. The ATO says the private use of an exempt electric car is still a reportable fringe benefit, so it shows on your income statement and can count towards some income tests.
What changes on 1 April 2027
Treasury's consultation page puts it simply. A 25 per cent FBT discount will apply to eligible EVs valued over $75,000 from 1 April 2027, and to all eligible EVs from 1 April 2029. The Treasurer's speech explains how the discount works: it is applied to the 20 per cent statutory formula rate that applies to every other car. So instead of no FBT at all, an EV in the 25 per cent band carries three quarters of the FBT a petrol car of the same value would.
In a typical novated lease the FBT is cancelled by paying part of the lease from your after-tax pay (the employee contribution method). A smaller taxable value means a smaller after-tax contribution. That is why the 25 per cent discount still helps, but nowhere near as much as a full exemption, where that after-tax slice is close to nil.
Where it is up to in Parliament
The change was announced in the 2026 to 27 Budget after Treasury's statutory review of the Electric Car Discount (final report 5 May 2026). Draft law went out for consultation from 11 to 28 September 2026. The Treasurer introduced it as Schedule 5 of the Treasury Laws Amendment (Tax Reform No. 4) Bill 2026 on 27 October, and the House of Representatives passed the bill on 29 October. At the time of writing we could not find a Senate vote, so the change is government policy in a bill, not yet law. The dates could still move if the Senate amends it.
Which cars sit where: Tesla as the worked example
We use Tesla here because its Australian configurator shows a price for every grade, and its two big sellers straddle the new line. These are Tesla's listed prices on 13 November 2026, before on-road costs.
| Model and grade | Tesla list price | Band from 1 April 2027 |
|---|---|---|
| Model 3 Rear-Wheel Drive | $45,900 | Full exemption |
| Model 3 Premium Rear-Wheel Drive | $54,900 | Full exemption |
| Model 3 Premium Long Range RWD | $61,900 | Full exemption |
| Model 3 Performance AWD | $80,900 | 25 per cent discount |
| Model Y Premium Rear-Wheel Drive | $58,900 | Full exemption |
| Model Y Premium Long Range AWD | $68,900 | Full exemption |
| Model Y L Premium AWD (six seats) | $74,900 | Full exemption, just |
| Model Y Performance AWD | $84,900 | 25 per cent discount |
Look hard at the Model Y L. At $74,900 it clears the line by $100. Paid paint, bigger wheels or accessories bought with the car could push its value over $75,000, so if you are close to the line, get the provider to confirm the exact value they will use before you sign. The precise valuation rule is in the bill's explanatory memorandum, and your lease provider will apply it.
The same logic applies to every brand. Most of the EVs in our best EVs under $60,000 and cheapest EVs guides sit comfortably under $75,000, so they keep the full exemption until 2029. The squeeze lands on performance grades and larger premium EVs between $75,000 and $91,661.
So should you sign before April 2027?
It depends on the car. Three cases:
Your car is under $75,000. Nothing changes for you until 1 April 2029, provided you commit before then. There is no rush created by these rules, so pick the car on its merits. Our Model 3 vs Seal vs EV4 vs 6e and Model Y vs Sealion 7 vs EV5 comparisons are the place to start.
Your car is between $75,000 and $91,661. This is where the deadline bites. A commitment made before 1 April 2027 keeps the full exemption for the life of that arrangement. Commit after it and you get the 25 per cent discount instead. Leave room for delivery times and your employer's paperwork, and remember the ATO's PHEV rules showed how strict the commitment test can be: the ATO had no discretion to extend the PHEV date for delivery delays.
Your car is over $91,661. No change. It was never eligible.
Things that can reset your protection
Grandfathering follows the commitment, not the car. For plug-in hybrids the ATO treats a change to lease payments or residual value, a break in the novation, or a change of employer as a new commitment, and the exemption falls away from that date. The Treasurer's speech uses the same idea for EVs: the treatment is the one in place when the last relevant commitment commenced. So if you lock in a car over $75,000 before April 2027, treat refinancing, restructuring or changing jobs as something to check with your provider first.
Running costs still count
FBT is only part of the sum. Charging at home is far cheaper than public fast charging, and our EV charging cost guide works through real tariffs. For background on how the exemption has been used to date, our July explainer on novated leasing an EV covers the basics of how a novated lease is structured.
The CarTell take
The full EV novated lease deal is not ending, it is narrowing. Under $75,000, little changes before 2029. Between $75,000 and the LCT line, 1 April 2027 is a real deadline, and a Model 3 Performance or Model Y Performance signed after it will cost more to run through a lease than one signed before. Check the car's value against $75,000, check the bill has passed, and get your lease provider's numbers in writing before you commit.
