The draft law
The 2027 FBT changes for electric cars, explained
Updated
The full FBT exemption behind most electric car novated leases is being phased down. The cut is in a Treasury exposure draft, not yet law, and it turns on two things: when you commit to the lease, and whether the car’s value is over $75,000.
Three commitment windows
The draft creates three periods. Commitments made before 1 April 2027 keep today’s exemption. Commitments from 1 April 2027 to 31 March 2029 get a 100% discount if the car’s base value is $75,000 or less, and a 25% discount above that up to the fuel-efficient luxury car tax limit. Commitments from 1 April 2029 get the 25% discount whatever the value. (Treasury exposure draft explanatory materials, checked )
The discount works by cutting the statutory fraction in the FBT car formula: from 0.2 to nil for a 100% discount, and to 0.15 for a 25% discount. A car over the limit stays at 0.2, with no concession. (Treasury exposure draft, checked )
The fuel-efficient luxury car tax limit for 2026–27 is $91,661, up from $91,387 in 2025–26. (ATO, checked )
Tax saved a year at a $120,000 salary
| Car's value | By 31 Mar 2027 | Apr 2027 – Mar 2029 | From Apr 2029 |
|---|---|---|---|
| $60,000 | $3,840100% discount | $3,840100% discount | $96025% discount |
| $85,000 | $5,440100% discount | $1,36025% discount | $1,36025% discount |
| $95,000 | $00% discount | $00% discount | $00% discount |
Estimate only. General information, not tax advice. It uses 2026–27 tax rates and the FBT statutory formula, and assumes you pay an after-tax contribution to clear any FBT. The rules for commitments from 1 April 2027 are a Treasury exposure draft, not law, and may change. Confirm your numbers with your employer, your novated lease provider or a registered tax agent.
What counts as a commitment, and what resets it
The explanatory materials say a commitment is made when there is a financially binding obligation that cannot be backed out of. (Treasury exposure draft explanatory materials, checked )
A new commitment on the same car ends the old treatment. The draft’s examples are refinancing, changing the lease term or residual value, fitting accessories that raise the lease payments, and changing employer, even within the same corporate group. (Treasury exposure draft explanatory materials, checked )
Ending a lease early and signing a new one just to keep the exemption may be caught by the general anti-avoidance rules. (Treasury exposure draft explanatory materials, checked )
Renewing a novated lease on the same car at the end of its term is a new commitment, so the renewal gets whatever rules apply on the day you renew. (Treasury exposure draft explanatory materials, checked )
The practical deadline is the day your deal becomes binding, and a lease made before the cut keeps its treatment only while you leave it alone. Ask your employer and provider which signature makes your commitment binding, and allow time for the car to be ordered and the paperwork to be done before the last day.
A new value test: base value, not first retail price
Today the exemption depends on luxury car tax never having been payable on the car, which means its value at the first retail sale was under the fuel-efficient limit. (ATO, checked )
For commitments from 1 April 2027 the draft tests the car’s base value when the employer first holds it, against both the $75,000 line and the fuel-efficient limit for that financial year. (Treasury exposure draft explanatory materials, checked )
Base value is the cost price excluding registration and stamp duty, plus dealer delivery, non-business accessories, GST and any luxury car tax. (ATO, checked )
Dealer delivery and options therefore count toward the $75,000 line. A car listed at $73,990 before on-road costs can end up over it once delivery and a paint option are added. Our price lines page flags every variant that sits close to a line.
Other details in the draft
- Only the statutory formula changes. The operating cost method, which works from logbook records, is not modified. (Treasury exposure draft explanatory materials, checked )
- Reportable fringe benefits keep being worked out as if the fraction were 0.2, so a discounted car still shows on your income statement. (Treasury exposure draft explanatory materials, checked )
- The changes would start on the later of 1 April 2027 and the first quarter day after Royal Assent, but apply to benefits from 1 April 2027 either way. (Treasury exposure draft explanatory materials, checked )
- Plug-in hybrids stay out: the draft defines an eligible car as a battery electric or hydrogen fuel cell vehicle. (Treasury exposure draft, checked )
Questions
Is the 1 April 2027 change law yet?
No. As of 3 October 2026 it is an exposure draft: Treasury published draft legislation and explanatory materials and took comments from 11 to 28 September 2026. It still has to be introduced to Parliament, pass both houses and receive Royal Assent, and it could change on the way.
Does my existing novated lease lose the exemption on 1 April 2027?
Not under the draft. A car provided under a commitment made before 1 April 2027 keeps the current exemption until that commitment ends. What ends it early is a new commitment: refinancing, changing the lease term or residual, adding accessories that raise the payments, or changing employer.
What if my car costs $75,000 or less?
The draft keeps a 100% discount, which works like the exemption, for cars with a base value of $75,000 or less, as long as the commitment is made before 1 April 2029. From 1 April 2029 every eligible electric car gets the 25% discount instead.
Is the new test on the drive-away price?
No. The draft tests the car's base value when the employer first holds it: broadly the GST-inclusive cost with dealer delivery and non-business accessories, leaving out registration and stamp duty. That is usually below the drive-away price.