Updated March 2026

The FBT electric car exemption has made electric vehicles a more attractive option for many Australian businesses. Understanding how the exemption works can help reduce Fringe Benefits Tax exposure while supporting sustainability goals.

In 2022, the Australian Government introduced legislation to exempt certain electric cars from FBT, making them a more attractive option for employers. Here’s what you need to know about this FBT exemption.

What is the electric cars FBT exemption?

Under this legislation, from 1 July 2022, benefits associated with providing eligible electric cars to employees are exempt from FBT. This includes not only the car itself but also most associated running costs.

Which vehicles qualify for the exemption?

To be eligible for the electric car FBT exemption, the car must meet all of the following conditions:

  • Be a zero‑emissions vehicle, specifically:
    • a battery electric vehicle (BEV), or
    • a hydrogen fuel cell electric vehicle
      (plug‑in hybrid electric vehicles generally do not qualify from 1 April 2025, unless transitional rules apply)[ato.gov.au]
  • Be a car designed to carry:
    • less than 1 tonne, and
    • fewer than 9 passengers (including the driver) [ato.gov.au]
  • Be first held and first used on or after 1 July 2022 [ato.gov.au]
  • Be provided to a current employee or their associate(s) for private use  [ato.gov.au]
  • Have never had luxury car tax (LCT) payable on its importation or sale [ato.gov.au]

*Luxury car tax (LCT) is payable on vehicles above the LCT threshold at the time of purchase or importation. For fuel-efficient vehicles, the LCT threshold is $89,332 for the 2023–24 financial year and $91,387 for the 2024–25 and 2025–26 financial years (inclusive of GST).

What expenses are covered by the FBT electric car exemption?

When your electric car meets all the eligibility requirements, these associated expenses are also exempt from FBT:

  • Vehicle registration
  • Insurance premiums
  • Repairs and maintenance
  • Electricity costs for charging the vehicle, including reasonable estimates of home charging costs where supported by appropriate records.

Important considerations

Charging stations:

The cost of installing or providing a home charging station is not covered by the FBT electric car exemption. If employers reimburse or fund home charging infrastructure, the FBT treatment should be reviewed separately.

If you provide compensation to employees for charging stations or related expenditures, you should seek advice to determine whether these benefits are subject to FBT.

Plug-in hybrids:

From 1 April 2025, plug‑in hybrid electric vehicles (PHEVs) are no longer treated as zero or low‑emission vehicles for fringe benefits tax (FBT) purposes. As a result, the FBT electric car exemption no longer applies to PHEVs, unless the vehicle qualifies under the transitional rules (i.e. there was a financially binding commitment in place and the car was used or available for private use before 1 April 2025).

Not all electric vehicles qualify for the electric car FBT exemption:

It’s important to note that electric motorcycles and scooters aren’t considered cars for FBT purposes and, therefore, don’t qualify for this exemption, even if they’re electric.

The future of the electric cars FBT exemption

The legislation includes a requirement for the Government to review the operation of the exemption in future years, including the uptake of electric vehicles.

Get expert FBT guidance

The ever-evolving FBT obligations can be complex to navigate. At Davidsons, our tax specialists can help you understand how these exemptions apply to your specific situation and ensure you’re making the most of available benefits. To book a consultation, contact us by:

This article was written by Tax & Business Services Senior Accountant Tamara Wright.

Disclaimer: The information provided in this article is factual in nature and objectively ascertainable and, therefore, does not constitute financial product advice. Importantly, the factual information that has been supplied does not take into account your personal circumstances, objectives or goals.