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EV FBT exemption review timing — what is known, what is not, and why it matters

The Fringe Benefits Tax (FBT) exemption for eligible electric vehicles is not guaranteed indefinitely.

This is explicitly written into the legislation itself.

Understanding the review timing, and how it interacts with novated lease structures, is essential for assessing policy risk.

The EV FBT exemption is legislated with a review clause

When the EV FBT exemption was introduced, it was not framed as a permanent policy.

Instead, the legislation explicitly requires a formal government review to assess:

  • fiscal cost,
  • behavioural impact,
  • and whether the policy should continue.

This review is mandatory.

The review window: what the legislation actually says

Under the current legislation, the review must be completed within an 18-month window, running from:

1 January 2026 to 1 July 2027

Within that window, the government is required to:

  • conduct the review,
  • table findings, and
  • decide whether the exemption should be continued, modified, or discontinued.

Importantly:

  • the review does not need to run for the entire window, and
  • recommendations could be made earlier within that period.

There is a common shorthand in many sources (including some ATO pages) that the review would conclude in mid-2027, and therefore one may be tempted to infer that changes will not occur before that date.

However, a careful reading of the legislation demonstrates that this is not true - it only has to take place BEFORE mid 2027, and is not slated to complete right on this date.

Here is the actual wording:

(5) The review must be completed, and a report on the review must be given to the Minister, within 18 months after the end of the 3 years from the commencement of this Schedule.

(For reference, the commencement commenced on 1/1/2023)

What outcomes are possible

At the conclusion of the review, the government may choose to:

  • extend the exemption unchanged,
  • modify the exemption (e.g. thresholds, eligibility, scope), or
  • discontinue the exemption entirely.

At present:

  • no outcome is pre-committed, and
  • no future grandfathering rules are guaranteed in advance.

Any claims that the exemption “will definitely end” or “will definitely stay” are speculative.

Grandfathering: what usually happens (but is not guaranteed)

While future outcomes are uncertain, historical practice suggests the following structure if changes occur:

  • existing novated leases are likely to be grandfathered until the end of their contracted term, while
  • new leases and lease extensions would follow the new rules.

This pattern has applied to many past tax law changes.

However, it is important to understand that:

grandfathering is a convention, not a legal entitlement.

Impact on long leases vs repeated short leasees

The review timing interacts very differently with different lease structures.

Long upfront leases (e.g. 5 years)

  • lock in today’s tax treatment for the entire lease term,
  • minimise exposure to mid-lease policy changes,
  • maximise certainty (at the cost of higher early-termination exposure).

Short rolling leases (e.g. 1 + 1 + 1 + 1)

  • re-expose each renewal to current policy,
  • allow flexibility only while the policy remains unchanged,
  • materially increase exposure to policy risk if the exemption is modified or withdrawn.

If the exemption ends, repeated short renewals could:

  • lose FBT exemption mid-ownership
  • reduce expected total savings

What this page is not saying

This page is not saying that:

  • the exemption will definitely end,
  • everyone should rush into long FBT-exempt leases, or
  • short FBT-exempt leases are “wrong”.

The fate of FBT-exemption is only one of many considerations on choosing an appropriate lease duration.

How this should inform decision-making

When considering lease length, you should explicitly ask:

  • What assumptions am I making about future tax policy?
  • What happens if those assumptions are wrong?
  • Am I being compensated for taking that risk?

These questions matter just as much as:

  • interest rate,
  • residual value,
  • or headline “tax saved”.

Key takeaway

If you remember nothing else:

The EV FBT exemption is subject to a legislated review, not guaranteed permanence.

Lease length determines how exposed you are to that uncertainty.

Choosing a lease duration is therefore both a financial decision and a policy-risk decision.

Optional Support

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