As petrol prices continue to surge amid global supply challenges, Australians are turning to electric vehicles (EVs) in record numbers. However, the landscape of electric car incentives in Australia is facing a potential shake-up. With the Federal Budget approaching in May 2026, the government is reviewing key tax exemptions and considering new road user charges that could significantly impact both current and prospective EV owners.
The shift towards sustainable transport in Australia has been accelerating rapidly. In 2025, a record 103,270 EVs were sold nationwide, accounting for 8.3 per cent of total vehicle sales [1]. This momentum has continued into 2026, with electric vehicles capturing 11.8 per cent of new car sales in February alone [2]. Yet, as the fleet of zero-emission vehicles grows, policymakers are grappling with how to balance the need to encourage EV adoption against the long-term decline in fuel excise revenue.
The Review of the Electric Car Discount
One of the most significant drivers of EV adoption in Australia has been the Electric Car Discount, which provides a fringe benefits tax (FBT) exemption for eligible electric vehicles purchased through a novated lease. This policy has made EVs significantly more affordable for salaried employees, allowing them to pay for their vehicle and running costs using pre-tax income.
Recent industry data highlights just how crucial this incentive has been. According to the Australian Finance Industry Association (AFIA), lending for low-emission cars rose by nearly 20 per cent in 2025, reaching $7.37 billion [2]. Furthermore, almost one in four sales for major EV dealers in 2025 came from novated lease buyers [3].
However, the cost of this exemption to the taxpayer has exceeded initial projections, with estimates suggesting it could cost $2.8 billion in the 2028-29 financial year [3]. Consequently, the Federal Government is currently reviewing the FBT exemption. Reports indicate that the government may consider ending the perk entirely or restricting it to cheaper models [3].
The potential removal of this incentive has sparked concern within the industry. AFIA research reveals that while 39 per cent of Australians are considering a low-emission vehicle for their next purchase, 37 per cent state they would be less likely to choose an EV if the FBT exemption is removed [2]. Industry leaders warn that rolling back these electric car incentives in Australia could dampen consumer confidence and slow the progress the nation has made toward its emission reduction targets.
The Looming EV Road User Charge
Alongside the review of tax exemptions, the Federal Government is reportedly accelerating work on a national EV road user charge [1]. This distance-based charge is being considered as a mechanism to offset the loss of fuel excise revenue, which currently delivers approximately $7.3 billion from petrol-powered vehicles and $17.6 billion from diesel vehicles annually [1].
The fuel excise is a flat sales tax imposed on petrol and diesel, currently set at 52.6 cents per litre [1]. Because EV drivers do not purchase traditional fuel, they do not contribute to this specific revenue stream, which historically funded road maintenance before being absorbed into consolidated revenue.
The concept of an EV road user charge is not entirely new in Australia. Victoria introduced a state-based charge of 2.8 cents per kilometre in 2021, but the High Court of Australia ruled the scheme unconstitutional in 2023, forcing the state to abandon the policy and refund the collected revenue [1]. New South Wales had also planned to introduce a similar charge from July 2027, but the High Court ruling has shifted the focus to a federally implemented approach [1].
Treasury staff are reportedly working on how to implement a national charge, which could be tracked via in-car GPS or an annual odometer reading, with a planned introduction around 2028 [1]. The Australian Electric Vehicle Association (AEVA) has advocated that any future road user charge should apply universally across all vehicle types, rather than targeting EVs exclusively, to ensure an equitable system [1].
Expanding Charging Infrastructure
While policy debates continue, the physical infrastructure supporting EVs in Australia is expanding to meet growing demand. A key component of consumer confidence in electric vehicles is the availability and reliability of charging stations.
As of February 2026, Australia boasts 1,517 fast-charging sites and 4,532 individual charger bays [4]. Significant investments are also being made in residential charging solutions. Recently, a Melbourne strata building installed the Southern Hemisphere’s largest residential EV charging hub, providing a scalable model for body corporates and apartment dwellers across the country [4].
This expansion is critical, as state-based rebates and the deployment of public charging networks remain vital for building buyer confidence and accelerating the transition to electric transport [2].
Practical Tips for Prospective EV Drivers
With potential changes to electric car incentives in Australia on the horizon, now is a crucial time for consumers considering the switch to an EV. Here are some practical takeaways to help you navigate the current landscape:
- Evaluate Novated Leasing Options Now: If you are a salaried employee, investigate whether a novated lease under the current FBT exemption makes financial sense for you. With the policy under review, taking advantage of the existing Electric Car Discount before any potential changes are implemented in the May budget could result in significant savings.
- Factor in Future Running Costs: While EVs currently offer substantial savings on fuel and maintenance, it is prudent to factor a potential future road user charge into your long-term cost-of-ownership calculations. Even with a distance-based charge, EVs are likely to remain more cost-effective to run than their internal combustion engine counterparts.
- Assess Your Charging Capabilities: Consider your daily driving habits and home charging options. If you live in an apartment or strata building, engage with your body corporate about installing charging infrastructure, citing successful models like the recent Melbourne installation.
- Stay Informed on State Incentives: In addition to federal policies, many states and territories offer their own rebates, stamp duty exemptions, or registration discounts for EVs. Ensure you research the specific incentives available in your location.
Make Every Trip Electric
The Australian EV landscape is evolving rapidly. While the upcoming Federal Budget may bring changes to tax exemptions and introduce new road user charges, the fundamental benefits of driving an electric vehicle—lower emissions, reduced running costs, and a superior driving experience—remain unchanged.
If you are considering making the switch but want to experience the lifestyle first-hand, there is no better way than getting behind the wheel. Whether you are planning a weekend getaway or just want to test an EV for your daily commute, renting an electric vehicle allows you to explore the technology without a long-term commitment.
Ready to drive the future today? Join Australia’s largest EV community and rent an electric car on evee.com.au to experience the benefits for yourself.
