The 2026–27 Federal Budget did not deliver a broad overhaul of Fringe Benefits Tax (FBT), but it did include several measures that employers, advisers and salary packaging providers should pay close attention to.

The headline change is the Government’s decision to phase down the generous electric vehicle (EV) FBT exemption introduced in recent years.

What is changing?

Currently, eligible electric vehicles receive a full exemption from FBT where:

  • The vehicle is a zero or low-emissions vehicle; and.
  • The first retail sale occurred on or after 1 July 2022.

While the electric vehicle discount is not disappearing entirely, there will be a shift from a full exemption to a partial concession over time.

Importantly, the Budget did not announce changes to many commonly used FBT concessions or arrangements, including:

  • Meal entertainment.
  • Car parking FBT.
  • Living-away-from-home allowances.
  • Exempt work-related items.
  • Portable electronic devices.
  • Relocation benefits.
  • Minor benefits exemption.
  • Otherwise deductible rule arrangements.

When do the changes apply?

The Government will phase down the Electric Vehicle FBT concession over time as follows:

From 1 April 2027 to 31 March 2029.

  • EVs valued at $75,000 or less will continue to receive a 100% FBT discount.
  • EVs above $75,000, up to the fuel-efficient luxury car tax (LCT) threshold, will receive a 25% FBT discount.

From 1 April 2029.

  • Eligible EVs up to the fuel-efficient LCT threshold will move to a permanent 25% FBT discount, implemented via a 15% statutory formula rate.
  • Vehicles above the fuel-efficient LCT threshold will remain subject to the standard 20% statutory rate.

The Government also confirmed that reportable fringe benefits amounts (RFBAs) will continue to be calculated as if the standard 20% statutory rate or cost basis method applied.

Insights

For employers, this means that salary packaging economics will change as the FBT exemption has been a major driver of EV novated lease popularity. The phased reduction means:

  • Higher-value EVs may become less tax-effective from April 2027.
  • The relative attractiveness of lower-priced EVs will increase.
  • Employers may need to reassess fleet policies and packaging offerings.

There may be additional compliance complexity as the new rules introduce:

  • Multiple concession tiers.
  • Valuation considerations.
  • Transitional issues for some existing arrangements.
  • Payroll and salary packaging providers may need system updates ahead of the 2027 FBT year.

Overall, the 2026–27 Budget signals a clear shift in the Government’s approach to EV tax concessions and although broader FBT reform was absent from this Budget, the EV changes alone are significant enough to reshape salary packaging strategies over the coming years.

If you want to know more about how these changes may impact you, please do not hesitate to reach out to your trusted Hall Chadwick advisor to find out more.