The federal government's plan to tighten the Electric Car Discount has cleared its first hurdle. The House of Representatives passed the Treasury Laws Amendment (Tax Reform No. 4) Bill 2026 on 29 October 2026, including the changes that would limit the full fringe benefits tax (FBT) exemption to electric cars priced at $75,000 or less from April 2027.
The bill has not passed the Senate and is not yet law. The ATO's own guidance, updated on 3 November, still says the measure is not yet law. The current exemption continues to apply in full until the Senate agrees to the bill and it receives Royal Assent.
The bill moved through the House in three days
According to the Parliament of Australia bill page, the bill was introduced on 27 October, debated on 28 October and agreed to at the third reading on 29 October. The EV changes sit in Schedule 5. Crossbench members circulated proposed amendments during the House debate. The bill now goes to the Senate, where the government needs support from the Greens or the crossbench to pass it.
What changes if the bill becomes law
The Electric Car Discount currently exempts eligible battery electric and hydrogen fuel cell cars below the luxury car tax threshold from FBT. That exemption is what makes novated leasing of EVs so popular. The bill would change it in two stages.
| Car value | Today | Stage 1 (from April 2027) | Stage 2 (from 1 April 2029) |
|---|---|---|---|
| $75,000 or less | 100% FBT exempt | 100% exempt (0% statutory rate) | 25% discount |
| Above $75,000 up to the LCT threshold for fuel-efficient vehicles | 100% FBT exempt | 25% discount (15% statutory rate) | 25% discount |
The explanatory memorandum says stage 1 would start on the later of 1 April 2027 and the first day of the quarter after Royal Assent. If the Senate delays the bill, the start date could move. The government estimates the changes will improve the underlying cash balance by about $1.7 billion over the forward estimates.
Existing novated leases are protected
The ATO says existing leases won't be affected by these changes. The protection does not cover everything, though. Under the bill, refinancing a lease or moving the car to a new employer arrangement can count as a new commitment, which could bring the car under the new rules.
- Buying under $75,000. Nothing changes until 2029, as long as the bill passes as written.
- Buying above $75,000. A lease signed before the new rules start keeps the full exemption. One signed afterwards would get only the 25% discount.
- Already leasing. Your current lease keeps its treatment, but get advice before refinancing or changing employers.
The proposed cut-off puts cars like the Tesla Model Y and BYD Atto 3 in focus, because price, options and variant choice will decide which side of $75,000 a car lands on. Our report on BMW iX3 orders ahead of the proposed FBT change shows how buyers of dearer EVs are already responding.
Pressure is building to cut the scheme further
The Senate vote comes as the scheme's cost draws criticism. A newspaper report this week said more than 112,000 people are claiming the exemption, with a reported annual cost of around $1.3 billion, far above the original forecast. Some economists are urging the Treasurer to means-test or scrap the discount in December's Mid-Year Economic and Fiscal Outlook (MYEFO).
The Coalition is reported to have vowed on 28 October to scrap the national EV subsidy if it wins government. The government has not announced any further changes beyond the bill.
What EV buyers should do now
For now, the full exemption still applies to eligible EVs below the luxury car tax threshold. Buyers planning a novated lease on an EV priced above $75,000 have the strongest reason to act before April 2027, but they should check the final shape of the law before signing anything. Buyers under $75,000 have more time. Our guide to the Tesla Model Y price in Australia shows where Australia's best-selling EV sits against the cap.