Tax handouts and current advantages enjoyed by electric vehicle owners could be coming to the end of the road. The federal Labor government has foreshadowed major tax reform in the upcoming May budget, and EVs appear to be in the firing line.
The government has long said the time will come when a new road user charge will need to be introduced to capture the growing number of EV drivers who don’t pay the fuel excise that helps fund road maintenance. And leaks from Treasury suggest that time is now.
Current exemptions from the fringe benefits tax (FBT) for EV leases could also be reconsidered or restricted to cheaper models in a bid to claw back billions in tax deductions.
Removing such tax breaks «would risk slowing the progress Australia has only just started to make» on EV adoption, David Smitherman, the CEO of EVDealer Group told Yahoo Finance.
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The dealer, which has only been operating in Australia since 2023, is a dedicated retail arm for Chinese EV giant BYD and is among those in the industry that is nervous about benefits being removed.
«If the FBT exemption was removed entirely, we would be genuinely disappointed,» Smitherman said.
«Policies like this have played a meaningful role in encouraging businesses to adopt electric vehicles, particularly through fleet uptake, which is critical to reducing overall emissions.
«We’re finally seeing Australia begin to catch up with other markets, and removing that support now would likely dampen confidence and momentum.»
The government currently offers what’s known as the Electric Car Discount that allows salaried employees to take out a novated lease on an EV and pay for it from their pre-tax salary without incurring fringe benefits tax.
In 2025, almost one in four of EVDealer Group’s sales came from novated lease buyers, it said, with many customers apparently citing the incentive as a factor in making the switch.
The FBT exemption for plug-in hybrid electric vehicles or PHEVs ended on April 1, 2025.
And new reports suggest the exemption for pure electric vehicles leased through novated salary packaging is being reconsidered by the government after the cost to the taxpayer blew out by more than expected. The exemption is tipped to cost $2.8 billion in the 2028-29 financial year, prompting the government to consider ending the perk or restricting it to cheaper models, the SMH reported this month.
According to the publication, the government is also reviewing the zero tariff on imported electric cars.
«Tax incentives play an important role in helping buyers overcome that initial barrier and make the switch sooner rather than later,» Smitherman told Yahoo Finance.
«Cutting support too early risks slowing progress just as the market is beginning to scale.»
BYD offers cars from $24,000 through to around $71,000, so if changes only allow the deduction on cheaper cars, it could actually benefit BYD and other Chinese made EVs that cater to the more affordable end of the market.
Meanwhile an ostensible leak from the Treasury to The Australian newspaper this week suggested the government is getting serious about a national road user charge for EVs.
For months, Treasurer Jim Chalmers has talked about the need for an impending tax related to how much EV motorists use the roads.
Logistical challenges and major questions about how such a tax would be implemented remain. Possible solutions include toll transponders — like those used in Singapore — or GPS-based systems to track vehicle use, but that does raise privacy concerns. Another option could be an annual odometer reading at the time of registration renewal in coordination with state transport authorities.
As more motorists look switch to EVs amid high petrol prices (with search activity showing a 110 per cent jump), the appeal for the government to roll out the EV tax will only grow.
«EVs at some point need to start paying their way,» motoring expert Toby Hagon previously told Yahoo Finance.
«It’s an inevitability that they’re going to have to start paying taxes as petrol and diesel cars do today.»
As inflation expectations hit a record high among Australian consumers and Donald Trump’s Iran war shows no sign of de-escalating, Chalmers told a Business Council dinner on Tuesday he was confident of landing his most ambitious budget yet.
«We are absolutely full tilt now working through a broader than usual range of options,» he said.
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