Australia’s nascent electric vehicle (EV) market is at a critical juncture, with key industry bodies strongly advocating for the continuation of the fringe benefit tax (FBT) exemption. Industry leaders warn that removing the incentive could significantly hinder sales and reverse the progress made in adopting cleaner transportation.
FBT Exemption Hailed as Catalyst for EV Adoption
The Electric Vehicle Council (EVC) and the National Automotive Leasing and Salary Packaging Association (NALSPA) have both voiced concerns that the potential expiry of the Electric Car Discount, which includes the FBT exemption introduced in 2022, would stifle growth. Both organisations describe the policy as a resounding success that has effectively driven EV uptake and contributed to reducing transport emissions.
According to the EVC, the FBT exemption has been instrumental in facilitating over 105,000 additional EV purchases. The council estimates that the initiative has yielded economic and health benefits of up to $3 for every dollar invested. Crucially, it has also been credited with tripling the size of the second-hand EV market.
“The Electric Car Discount has helped take Australia from an EV trickle to a real market for people who want to drive cleaner cars and save up to $3,000 each year on fuel and maintenance,” stated Julie Delvecchio, EVC CEO. She added, “With EV upfront costs still higher than comparable internal combustion engine cars, tens of thousands of Australians living in outer suburbs – including firefighters, teachers and nurses – could only afford their first EV thanks to the Electric Car Discount.”
Delvecchio further highlighted the positive impact on the used car market: “The Discount has also stimulated a wave of affordable, off-lease EVs that are now flowing through to the second-hand market, putting them within reach of more everyday Australians.”
Impact on Sales and International Precedents
Rohan Martin, CEO of NALSPA, noted that the policy initially aimed to introduce approximately 5,000 EVs to Australian roads, but its actual impact has significantly exceeded expectations, resulting in over 100,000 EVs entering the market. “The Electric Car Discount is most popular with outer-suburban families and it is estimated it is responsible for at least half of all EVs sold in Australia today,” Martin commented.
A legislative review of the Electric Car Discount was announced in December, with submissions closing last week. The EVC cautioned that an early termination of the FBT exemption could stall momentum, drawing parallels to the plug-in hybrid (PHEV) market. When the Electric Car Discount for PHEVs concluded in March 2025, novated lease settlements for these vehicles plummeted by 94 per cent within a single quarter, subsequently reverting to pre-policy levels.
The council also pointed to international examples where changes in EV incentives have had negative consequences. Germany saw its EV market share drop from 31 per cent in 2022 to 19 per cent in 2024, necessitating a new €3 billion support scheme. Similarly, Canada reintroduced its EV subsidy program. In New Zealand, the repeal of its Clean Car Discount saw market share reverse from 27 per cent to 11 per cent.
“We know the risks that come with removing EV incentives too early,” Delvecchio warned. “Canada and Germany have both recently re-introduced EV subsidies worth $CAD2.3 billion and €3 billion, respectively, after the premature withdrawal of incentives reduced EV sales by up to 12 per cent.”
Calls for Sustained Support and Expanded Incentives
Both the EVC and NALSPA are urging the government to maintain the Electric Vehicle Discount until Australia achieves a more substantial EV market share, rather than relying on predetermined end dates for the policy.
NALSPA has also proposed additional measures to boost EV adoption, including incentives for vehicle-to-load (V2L), vehicle-to-home (V2H), and vehicle-to-grid (V2G) technologies, alongside increased investment in charging infrastructure.
The EVC echoed these sentiments, advocating for the expansion of demand-side incentives for individuals unable to access novated leasing. Potential measures include direct consumer rebates or Goods and Services Tax (GST) exemptions.