Unplugged! EV buying incentives to be reduced as sales spiral. Not everyone is happy
The Albanese Government has confirmed it will scale back its Electric Car Discount over time, retaining support for lower-priced vehicles while reducing concessions for more expensive models.
In a joint statement, Treasurer Jim Chalmers and Climate Change and Energy Minister Chris Bowen said the changes were designed to deliver “fairer and more financially sustainable” tax treatment as the EV market matures.
Under the revised scheme, the current full fringe benefits tax (FBT) exemption for eligible electric vehicles will remain until March 2027.
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Between April 2027 and April 2029, the full exemption will apply only to EVs priced at $75,000 or less, with models above that price but below the luxury car tax threshold receiving a reduced 25 per cent discount.
From April 2029 onwards, all eligible EVs under the luxury car tax threshold will receive a 25 per cent FBT discount rather than a full exemption.
Existing novated leases will not be affected, and EVs will continue to be exempt from import tariffs. The government said the changes are expected to save the budget $1.7 billion over five years from 2025–26.
In outlining its decision, the government pointed to rapid growth in the availability of lower-priced EVs and rising uptake, noting electrified vehicles accounted for 22.9 per cent of new car sales in March 2026, up from 1.8 per cent in May 2022.
It said the reforms followed a statutory review that found the policy had successfully boosted adoption and reduced emissions, but required adjustment as the market evolves.
The Electric Vehicle Council welcomed the announcement, saying most electric cars would remain eligible for the full discount for several years.
Chief executive Julie Delvecchio said the decision provided certainty for households, adding: “This is good news for everyday Australians who are doing the sums on going electric,” and that the changes mean “most electric cars in Australia will remain eligible for the Electric Car Discount, allowing people to save thousands on their annual fuel bills.”
The National Automotive Leasing and Salary Packaging Association also backed the approach, describing it as a balanced outcome for households and industry.
NALSPA chief executive Rohan Martin said: “At a time when Australians are feeling real pain at the pump, the Electric Car Discount is helping households take control of their fuel bills while reducing emissions and reliance on foreign-owned oil,” and warned that “withdrawing incentives too early stalls adoption, delays emissions reductions and leaves households exposed to ongoing fuel price volatility.”
The Motor Trades Association of Australia said the phased approach would provide stability for businesses as the sector transitions.
Interim executive director Peter Jones said the announcement delivered the “policy stability and a managed transition” the industry had been calling for.
Similarly, the Australian Automotive Dealer Association described the changes as pragmatic, aimed at maintaining demand while improving the sustainability of the policy.
However, Independent MP Monique Ryan welcomed the extension in the short term but criticised the decision to wind the policy back, warning it could slow EV uptake.
Ryan said: “We are smack bang in the middle of the biggest fuel crisis of our lifetimes… now is not the time to start winding back the electric car discount,” adding that the policy had already proven effective in accelerating EV uptake and expanding access to more affordable second-hand vehicles.
She argued the FBT exemption had driven more than 105,000 additional EV purchases since 2022 and pointed to international examples where the removal of incentives led to sharp falls in sales, including declines in markets such as New Zealand following subsidy changes.
Ryan said the policy had been effective in reducing emissions and lowering fuel costs for households, adding that it should be strengthened rather than scaled back.
Further responses from industry and stakeholders are expected as the sector assesses the longer-term impact of the staged changes on affordability, fleet uptake and EV demand in Australia.
