A new road charge and less generous tax exemptions for EV drivers could be rolled out as electric vehicle interest surges amid an ongoing fuel crisis.
Nick Whigham, Head of Yahoo Finance Australia
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 new leaks from Treasury suggest that time is nigh.
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.
But removing such tax breaks "would risk slowing the progress Australia has only just started to make" on EV adoption, the CEO of EVDealer Group, David Smitherman, told Yahoo Finance.
"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."