Now, that discount is under review.
There are no immediate changes on the table, but the review is an important reminder that incentives do not last forever. Understanding how the discount works, and what the review could mean, can help you make smarter decisions before the rules shift.
What is the Electric Car Discount?
Despite the name, this is not a cash rebate paid back to you. The Electric Car Discount works through the tax system and can significantly reduce the after-tax cost of an eligible electric vehicle when it is provided through an employer or business structure.
For many people, this has made electric vehicles more affordable than petrol or diesel alternatives, even at higher purchase prices.
The key benefits explained simply
1. Fringe Benefits Tax exemption
This is the most valuable part of the discount.
When an eligible electric vehicle is provided to an employee and used privately, it is exempt from Fringe Benefits Tax. Normally, this tax can be charged at up to 47%, so removing it can result in substantial annual savings.
To qualify:
- The vehicle must be a battery electric or hydrogen fuel cell vehicle
- Plug-in hybrids are no longer eligible for new arrangements from 1 April 2025
- The car must have been first held and used after 1 July 2022
- The purchase price must be below the luxury car tax threshold at the time of purchase
2. Higher luxury car tax threshold
Electric and other fuel-efficient vehicles benefit from a higher luxury car tax threshold.
For the 2025–26 year, that threshold is $91,387, compared to $76,950 for other vehicles. Staying under this higher limit can prevent luxury car tax applying to part of the purchase price.
3. Lower import costs
Some electric vehicles are exempt from the 5% customs duty. While not universal, this can reduce upfront costs and improve the overall value proposition.
Why electric vehicles have become attractive for business
Beyond tax concessions, electric vehicles also bring practical advantages.
Running costs are typically lower due to cheaper electricity compared to fuel and fewer servicing requirements. Resale values have also remained relatively strong, which supports long-term cost planning.
These factors have made electric vehicles particularly appealing for salary packaging arrangements and small to medium business fleets.
Why the Government Is reviewing the discount
The Electric Car Discount has been more popular than originally expected. As uptake has increased, so has the cost to the federal budget.
The current review is looking at:
- Whether the discount is still needed to encourage electric vehicle adoption
- Whether eligibility should be narrowed, such as limiting vehicle types or price points
- How the discount aligns with broader transport and emissions policies, including the National Vehicle Emissions Standard starting in 2025
Public consultation is underway, with a final report not expected until mid-2027. Importantly, there is no indication of immediate changes, and any future adjustments are likely to apply prospectively rather than retrospectively.
What this means for business owners and employees
Uncertainty often causes people to delay decisions, but the current rules are clear and legislated.
From a practical perspective:
- If you are considering replacing a vehicle in the next one to two years, now is a sensible time to review your options
- Existing arrangements are expected to be grandfathered, although this cannot be guaranteed
- Eligibility rules need to be checked carefully, particularly vehicle pricing and timing
- Charging infrastructure provided alongside a vehicle does not automatically receive the same tax treatment and should be reviewed separately
A sensible next step
The Electric Car Discount remains one of the most valuable tax concessions available for employee vehicles. While a review introduces longer-term uncertainty, the savings available today can still be significant when structured correctly.
If you are thinking about an electric vehicle for your business or through salary packaging, it is worth running the numbers properly. A short conversation with an adviser can help you understand whether an electric vehicle strategy makes sense under the current rules, and how to future-proof your decision.
If you would like to talk it through, the team at Lead Advisory Group can help you assess your options and tailor advice to your situation.
