FBT EV exemption 2026-2027: Electric vehicle tax changes explained
What’s Changing (And when)
Electric vehicle fringe benefits tax exemption is ending.
The government introduced a temporary exemption. Many businesses set up EV salary packaging programs. Now the exemption is being phased out.
Current (until 31 March 2027):
- All electric vehicles exempt from FBT
- Salary packaging available at no tax cost
- Popular for employee retention
From 1 April 2027:
- Only vehicles under $75,000 purchase price exempt from FBT
- Above $75,000 = FBT applies
From 1 April 2029:
- Even vehicles under $75,000 only get 25% FBT discount
- Full exemption ends permanently
This affects salary packaging, employee take-home pay, and payroll costs.
Who This Affects
Businesses using EV salary packaging:
- You provide EV to employee through salary sacrifice
- Employee forgoes salary to “pay” for the vehicle
- Saves employee income tax
- FBT was $0 (because exempted)
From 1 April 2027:
- If vehicle exceeds $75,000, FBT applies to your business
- You must pay FBT or adjust employee salary
- Employee’s take-home changes
Affected employees:
- Anyone with a salary-packaged EV
- Tesla Model 3/Y owners (often $60k–$80k)
- High-income earners in salary packaging programs
The FBT Cost (Real Numbers)
Example: $80,000 Tesla Model Y
Current (until 31 Mar 2027):
- Vehicle price: $80,000
- FBT: $0 (exempted)
- Employer cost: $0
From 1 April 2027:
- Vehicle price: $80,000
- FBT applies: ~$2,160/year (20% of value)
- Employer pays FBT OR reduces employee salary
From 1 April 2029:
- Vehicle price: $80,000 (no longer exempt)
- FBT applies with 25% discount
- Employer cost: higher
Impact on Payroll
Scenario: You have an employee on $120,000/year with a salary-packaged $80k EV
Current arrangement:
- Base salary: $90,000
- Vehicle benefit: $30,000 (value of EV)
- FBT: $0
- Employee’s taxable income: $120,000
- Employee tax: ~$31,000
From 1 April 2027 (if you absorb FBT cost):
- Base salary: $90,000
- Vehicle benefit: $30,000
- FBT cost (employer): ~$2,160/year
- Employee’s taxable income: $120,000 (unchanged)
- Employer now pays extra $2,160/year
OR (if you pass to employee via salary reduction):
- Base salary: $87,840 (reduced by FBT)
- Vehicle benefit: $30,000
- FBT: $0 (employee absorbs cost via lower salary)
- Employee’s taxable income: $117,840
- Employee takes home ~$1,512 less/year
Common Mistakes Businesses Make
Mistake 1: Not warning employees now
If you have EVs in salary packaging, employees need to know the exemption ends. Some may want to exit the program or downgrade vehicle price.
Mistake 2: Forgetting the $75,000 threshold
Vehicles exactly at $75,000 get exempted. At $75,001? FBT applies. Employees often don’t understand this.
Mistake 3: Not recalculating FBT
From 1 April 2027, you must recalculate FBT liability. If ignored, you face back-payments + penalties.
Mistake 4: Assuming salary packaging disappears
Salary packaging is NOT going away. EVs under $75,000 stay exempt until 2029. It’s just changing.
What You Should Do Now
Step 1: Audit your current program
List all salary-packaged vehicles:
- Vehicle model
- Purchase price (new)
- Current value
- Employee’s salary
- FBT cost (current and future)
Step 2: Calculate FBT impact (from April 2027)
For vehicles over $75,000:
- Calculate new FBT liability
- Decide: absorb cost or pass to employee?
- Budget for change
Step 3: Communicate with employees
Explain the change. Give options:
- Continue (FBT now applies)
- Upgrade to vehicle under $75,000
- Exit salary packaging
Step 4: Update payroll
From 1 April 2027:
- Recalculate FBT for each vehicle
- Update salary packaging arrangements
- Ensure compliance
Strategy Options
Option 1: Absorb the cost
- Continue offering EVs at no salary impact
- Your FBT cost increases
- Better for employee retention
Option 2: Pass to employee
- Reduce employee salary by FBT amount
- Employee keeps same vehicle
- Employee takes home less
- Risk: Retention issues
Option 3: Switch to cheaper EVs
- Recommend vehicles under $75,000
- Full exemption continues (until 2029)
- Limited model choices
Option 4: End salary packaging
- Stop EV programs
- Offer cash salary increase instead
- Employees buy own vehicles
- Removes FBT complexity
Get Help Planning
EV salary packaging is changing. One wrong move costs money.
In Campbelltown and Greater Sydney, we help businesses restructure salary packaging for the new FBT rules.
📞 Call: 04 044 71 816
We’ll audit your current program, calculate FBT impact, and help you restructure before April 2027.
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