The Australia government has decided to extend its Electric Car Discount (ECD) incentive programme, maintaining tax benefits for electric vehicle leasing arrangements as the country seeks to support continued growth in EV adoption.
The programme, introduced in 2022, allows employees to reduce the cost of leasing eligible electric vehicles through salary sacrifice arrangements by exempting part of the payments from Fringe Benefits Tax (FBT).
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A recent government review titled Statutory Review of the Electric Car Discount found the scheme contributed to approximately 64,000 additional battery-electric vehicle sales between 2022 and 2025. The programme also supported sales of around 78,000 plug-in hybrid vehicles during that period, although plug-in hybrids are no longer eligible for the incentive.
According to the review, electric vehicles accounted for 13.1% of new vehicle registrations in Australia in 2025, up from 2.0% in 2021. However, the country remains below the global EV average of 22%.
Jim Chalmers, Australia’s treasurer, and Chris Bowen, minister for climate change and energy, announced that the current version of the programme will continue until the end of March 2027.
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Under the existing structure, the full FBT exemption on salary-sacrificed lease payments for eligible electric vehicles will remain unchanged. Since the FBT rate can reach 47%, the exemption can save consumers several thousand Australian dollars over the duration of a lease contract.
The government also outlined a phased reduction of the incentive beginning in April 2027.
During the second phase, running from April 1, 2027, to April 1, 2029, the full FBT exemption will apply only to electric vehicles priced below 75,000 Australian dollars.
Electric vehicles priced above A$75,000 but below the luxury car tax threshold of A$120,000 will instead qualify for a 25% reduction in FBT.
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Chalmers said the revised structure is intended to encourage automakers to bring more affordable electric vehicles to the Australian market.
Beginning April 1, 2029, all eligible electric vehicles priced below the luxury car tax threshold will receive only a 25% FBT discount rather than a full exemption.
The government confirmed that eligible electric vehicles will continue to benefit from permanent import duty exemptions under the programme.
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According to British newspaper The Guardian, the incentive scheme has gained increased public attention following geopolitical tensions linked to the Iran conflict and concerns over shipping disruptions in the Strait of Hormuz, which raised fears of higher fuel prices and potential cuts to EV subsidies.
Instead of ending the programme, the government opted for a staged reduction approach that preserves EV incentives while gradually lowering the level of support over time.
