Australia's federal government will continue its fringe benefits tax (FBT) exemption for electric vehicles for another 12 months before winding back the discount in stages to 2029, on the back of a surge in demand.
The full discount for battery EVs costing less than A$91,000 ($65,000) will continue until 31 March 2027, energy minister Chris Bowen said on 5 May, before the FBT is changed to cover only EVs costing less than A$75,000 from 1 April next year, while more expensive EVs will get a 25pc discount on FBT payable.
All EVs below the luxury car tax threshold will receive a 25pc discount on FBT from 1 April 2029.
The new policy comes after a government review of EV discounts, which found that 330,000 EVs were sold over the rebate's initial three years to December 2025, with about 133,000 bought under leases benefitting from the FBT exemption.
Plug-in hybrids, EVs also featuring a combustion engine but with an externally chargeable battery, were included in the exemption until 1 April 2025. Around 64,000 extra battery EVs and 78,000 extra EVs including plug-ins were sold due to the discount in the first three years, according to the review.
The nation's Productivity Commission (PC) had advocated a phasing out of the FBT, a policy platform criticised by industry body the EV Council as stalling Australia's energy transition.
The PC estimated that the electric car discount's (ECD) cost of CO2-equivalent (CO2e) emissions abatement was somewhere between A$987-20,084/t, unfavourable compared to other policies, but improved air quality, lower operational costs for motorists and reducing reliance on imported fuel were considered benefits, the review said.
Battery boom
Australia used 273,000 b/d of gasoline last year, mainly for passenger cars, while a proportion of the 578,000 b/d in average gasoil consumption went to light commercial and passenger vehicles.
But EV uptake is rising. Soaring fuel costs and panic-buying which led to tighter availability of transport fuel in some areas may be boosting EV uptake.
EVs accounted for 14.6pc and 16.4pc of all new sales in March-April, up from 7.5pc and 5.9pc a year earlier, according to Federal Chamber of Automotive Industries data.
This spike may also be due to concerns about the FBT phase-out ahead of the 12 May 2026 budget and some impact from Canberra's fuel efficiency standard, which mandates carmakers to meet tightening emissions standards across their range.
A commuter-centric nation, Australians mostly live in suburban areas characterised by distance from employment and poor public transport connections. Demand for EVs is still well-below combustion engines, renewables lobby Rewiring Australia said on 5 May, and more charging infrastructure and affordable supply are needed to make EVs the first choice.
Transport-related emissions were 98.7mn t CO2e in the year ending 30 June 2025, or 22.5pc of Australia's total, up by 0.3pc on the year.
05052026034544.png)
