PHEV tax break ends in Australia, just as sales boom and EVs falter

Australian motorists can no longer take advantage of the Fringe Benefits Tax (FBT) exemption for plug-in hybrid vehicles (PHEVs), despite the tax break continuing indefinitely for electric vehicles (EVs).

Launched in July 2022, the FBT exemption applies to all new EVs – and until yesterday PHEVs – priced under the Luxury Car Tax (LCT) threshold for fuel-efficient vehicles (currently $91,387), and purchased through a novated lease.

Under the scheme, the government effectively absorbs the cost of your employer’s FBT bill, which would typically be passed on to you, bringing annual savings of up to five figures.

While there’s no time limit on the scheme for EVs, since its introduction there has been a deadline of April 1, 2025 for PHEVs, requiring eligible vehicles to be delivered by the end of last month.

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Last month, data supplied to the Australian Financial Review by the National Automotive Leasing and Salary Packaging Association (NALSPA) claimed more than 100,000 eligible novated leases have been taken out for EVs and PHEVs.

In the time since its introduction, EVs have increased from accounting for 1.8 per cent of Australia’s new vehicle market to 7.4 per cent as of the end of last year. Likewise, PHEV sales have risen from less than 1.0 per cent of the market to almost 2.0 per cent.

Data shows that since the FBT exemption came into effect, 211,755 EVs have been delivered in Australia, compared to just 44,050 PHEVs.

However, EV sales are slowing down, with 9516 deliveries in the first two months of 2025, a decrease of 36.6 per cent on the same period last year.

By contrast, there have only been 6779 deliveries of PHEVs so far this year, but that’s up a massive 222.2 per cent on the first two months of 2024.

This is partially driven by a broader range of PHEVs becoming available, including in the past year, though the EV market also continues to add new players.

Two new PHEVs from BYD, the Sealion 6 mid-size SUV launched last year and the Shark 6 ute, which commenced deliveries this year, have continued the ambitious Chinese brand’s rapid sales growth, however, it’s yet to be seen what impact the end of the FBT exemption will have on PHEV demand.

Given the scheme is still running for EVs, it’s possible potential PHEV buyers will now look to go all-electric due to the FBT savings.

EV and PHEV sales in Australia, July 2022 to February 2025

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