First, the good news: nothing changes until 31 March 2027

Let's be clear about the timeline, because a lot of people are panicking unnecessarily. The full EV FBT exemption is still in place today — 11 July 2026. You have until 31 March 2027 to lock in the most generous version of the deal. Any novated lease you establish on or before that date is grandfathered under the current rules for its entire term. The Government confirmed this when it announced the phased changes on 5 May 2026.

So if you're reading this and thinking about a BYD Sealion 7, a Tesla Model Y, a Kia EV5, or any other eligible battery electric vehicle — you still have a real window. But it is closing.

What exactly is the EV FBT exemption — and why does it matter?

Here's the deal in plain English. Normally, when your employer gives you a benefit on top of your salary — like a car — the ATO taxes that benefit. It's called Fringe Benefits Tax, and the rate is 47%. That makes employer-provided cars expensive for everyone involved.

Back in July 2022, the government introduced the Electric Car Discount, which removed FBT entirely on eligible zero-emission vehicles provided through a novated lease or as a company car. That meant employees could salary-package an EV — paying for the lease and running costs from pre-tax dollars — with zero FBT to offset. The result was a dramatically cheaper way to get into a new car.

Under a correctly structured novated lease with the FBT exemption, registration, insurance, servicing, tyres, and even home-charging electricity can all be bundled in and paid from pre-tax salary. That stacking of benefits is what makes the numbers so compelling for eligible employees.

The numbers that made this the biggest car finance perk in Australia

The exemption wasn't just a nice-to-have. It fundamentally changed the cost of car ownership for a large chunk of working Australians. The savings were real and substantial. According to government figures, the exemption had grown to cost an estimated $5.1 billion — nearly three times the original forecast — driven by strong uptake. That tells you something: a lot of Australians worked out this was worth using.

What does that look like at an individual level? On a $65,000 EV salary-packaged over five years, an Australian on a $120,000 salary could save roughly $25,000–$30,000 in total cost compared to buying the same car with after-tax dollars. The saving comes from three things stacking: pre-tax lease and running cost payments, zero FBT on the car benefit, and a GST credit on the purchase price. Speak to a financial adviser about how these figures would apply to your specific income and situation.

So what's actually changing — and when?

The Government has confirmed a three-phase wind-back. Here's the plain-English version:

And critically: the $75,000 price threshold introduced in Phase 2 is not automatically indexed to inflation. Without future legislation to adjust it, more EV models could be dragged above the cap over time as prices move.

What about plug-in hybrids (PHEVs)?

PHEVs already lost their eligibility for new arrangements from 1 April 2025 — that change went through quietly and many Australians missed it. Any new PHEV novated lease entered after that date attracts full FBT, which significantly reduces the financial benefit. If you signed a PHEV arrangement before 1 April 2025, you're grandfathered for the life of that specific arrangement — but the moment you change vehicles or restructure the deal, you lose the protection.

Only battery electric vehicles (BEVs) and hydrogen fuel cell vehicles qualify for new FBT-exempt arrangements going forward.

The EV sales boom that makes this relevant to more Australians than ever

This isn't a niche policy for a handful of tech workers in Surry Hills. Australia's car market is shifting fast. In June 2026, Australians bought a record 140,058 new vehicles in a single month — and almost a quarter of them were electric. BYD has surged to become Australia's second-biggest car brand, with its sales up over 124% in the first half of 2026 compared to the same period last year. The Tesla Model Y set an all-time monthly record for any EV in June. More affordable EVs from BYD, Kia, MG, and others are now sitting comfortably under the $75,000 exemption cap — which means the FBT exemption isn't just accessible to high-income earners, it's genuinely within reach for a much broader group of Australians.

The dealer trap hiding inside all of this

Here's where it gets a bit ugly. When a perk this good exists, dealers and finance managers know about it — and some will use it to dress up a deal that isn't actually as good as it looks. A few things to watch for:

What the average rate environment means for your lease right now

The FBT exemption is the most powerful lever in an EV novated lease — but it doesn't exist in a vacuum. The average variable car loan rate in Australia is currently 8.35%, and the RBA's rate cuts earlier in 2026 haven't fully flowed through to consumer car finance. That means the lease rate embedded in your novated lease quote still matters. Compare the underlying rate, not just the take-home pay figure your salary packaging provider shows you. A lower lease rate compounds across a three-to-five-year term into a meaningful saving on top of the FBT benefit.

How Milam thinks about this

At Milam, we're focused on a different kind of car finance — one where you get lower weekly payments and an equity payout when you return the car, rather than getting nothing back at the end of a standard GFV loan. That's a fundamentally different structure to a novated lease, and it's designed for people who don't have access to employer salary packaging or who want more flexibility than a lease provides.

But here's the honest truth: if your employer offers salary packaging and you're buying an eligible BEV under $75,000, a novated lease with the FBT exemption is genuinely hard to beat on pure numbers — and you have until 31 March 2027 to lock that in under the most favourable terms. We'd rather tell you that than pretend there's only one way to finance a car. Speak to a financial adviser to work out which structure actually fits your situation.

The bottom line

The 2026 Federal Budget has set a clear timeline for winding back Australia's most powerful EV finance incentive. The full exemption runs until 31 March 2027 — after that, a $75,000 price cap kicks in and premium EVs become significantly less tax-effective under a novated lease. Any arrangement locked in before the deadline is grandfathered for its full term.

For everyday Australians who earn a salary, have an eligible employer, and are looking at an EV under $75,000 — the window is open and the maths are compelling. For PHEVs, the exemption on new arrangements is already gone. And for anyone being pressured into a rushed decision at the dealership: the deadline is real, but nine months is still enough time to do this properly.

Always speak to a financial adviser and a registered tax agent before entering any salary packaging or novated lease arrangement. Tax laws can change and individual outcomes vary significantly depending on income, employer, and vehicle choice.

Key deadline

Novated leases locked in before 31 March 2027 keep the full EV FBT exemption for their entire term — even after the rules change. That grandfathering protection is the most time-sensitive thing in Australian car finance right now.