EV FBT Exemption in 2026: What Perth Drivers Need to Know

If you have been thinking about switching to an electric vehicle, there is a significant financial incentive still available in 2026 that could save you thousands of dollars a year.

The Electric Car Discount, introduced by the Australian Government in July 2022, removes Fringe Benefits Tax (FBT) on eligible electric vehicles accessed through salary packaging or employer-provided arrangements. And right now, it still applies to battery electric vehicles like the Toyota bZ4X. Whether you are exploring novated leasing for the first time or looking to add an EV to your business fleet, here is what you need to know about the FBT exemption for electric cars in Australia heading into 2026 and beyond.

Fringe Benefits Tax is a tax that employers pay when they provide benefits to employees on top of their salary, such as a vehicle through a novated lease or company car arrangement. Before the Electric Car Discount was introduced, FBT applied to all vehicles regardless of their fuel type. 275package an eligible EV pay significantly less than they would for a comparable petrol or diesel vehicle, because the FBT component is removed entirely. The exemption also covers associated running costs including registration, insurance, repairs, maintenance, and electricity used for charging.

Important: Plug-in Hybrids No Longer Qualify

From 1 April 2025, plug-in hybrid electric vehicles (PHEVs) are no longer considered zero or low-emission vehicles under FBT law. This means any new PHEV purchase or lease arrangement entered into after this date will attract full FBT, just like a conventional petrol or diesel vehicle.

The only exception is for existing arrangements where the PHEV was already being used for private purposes before 1 April 2025, and there was a financially binding commitment in place to continue providing the vehicle. Delivery delays do not extend this eligibility, and any changes to the lease (such as refinancing or extending the term) will cancel the exemption. The vehicles that still qualify for the FBT exemption are full battery electric vehicles and hydrogen fuel cell vehicles only.

The savings from the FBT exemption can be substantial. When you salary package a vehicle through a novated lease, the lease payments, running costs, and fuel (or electricity) are deducted from your pre-tax income. With a standard vehicle, FBT would apply to offset some of that benefit. With an FBT-exempt EV, that tax is removed entirely.

The actual dollar amount depends on your salary, the vehicle price, lease term, and kilometres driven. But as a general guide, employees on an average Australian salary could save anywhere from $3,000 to $9,000 or more per year compared to salary packaging a non-exempt vehicle of similar value.

Both models come standard with safety features including blind-spot monitoring, rear cross-traffic alert, safe exit assist, and a surround-view camera. The updated 2026 model also features a larger 14-inch touchscreen, dual wireless phone charging, vehicle-to-load (V2L) capability, and paddle shifters for regenerative braking. Toyota is currently offering private buyers a complimentary charging package through the Toyota Go loyalty program: either a free 7kW JET Charge home wall charger or a 12-month Chargefox subscription with nationwide DC and AC charging access. This offer runs until the end of 2026.

This is the question on everyone’s mind. In December 2025, the Australian Government announced a statutory review of the Electric Car Discount. The review is being conducted by the Australian Centre for Evaluation (at Treasury) and the Department of Climate Change, Energy, the Environment and Water. Public submissions closed on 6 February 2026. The review is examining the policy’s operation over its first three years, including its impact on EV adoption, emissions reduction, and cost-of-living relief.

Here is what we know so far:

Industry analysts widely expect the exemption was always designed as a temporary measure to kickstart adoption. With the market now more established, it could be scaled back around 2027. If you have been considering an EV through salary packaging, acting sooner rather than later could help you lock in the current benefit for the duration of your lease.

While the FBT exemption means your employer does not pay FBT on the vehicle, the benefit is still classified as a reportable fringe benefit. This means the notional taxable value of the benefit is included on your income statement and may affect certain income-tested obligations, such as government benefits, child support, and HECS-HELP repayment thresholds.

It is worth speaking with your accountant or financial adviser to understand how a reportable fringe benefit might affect your individual circumstances.