FBT exemption on plug-in hybrids will not be extended, here's why
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Time is running out on a lucrative tax break for plug-in hybrid cars due to expire at the end of this month, just as the fuel-saving technology is made available in utes.
The Australian Government has unequivocally ruled out an extension for the popular exemption from Fringe Benefits Tax (FBT) for select plug-in hybrid vehicles (PHEVs) due to expire in three weeks’ time.
The perk – available to customers who take delivery through a novated lease, or ‘salary sacrifice’ – was introduced in 2022 but has assisted a recent surge in PHEV sales ahead of its April 1, 2025 expiry.
It allows PHEVs priced under the ‘fuel-efficient’ Luxury Car Tax threshold – currently $91,387 – to be acquired for the same monthly or weekly cost as conventional petrol cars that, in some cases, may cost up to 50 per cent more to buy outright.
MORE: Plug-in hybrid sales surge as electric car demand continues to dwindle
Such is its popularity that the Federal Government now forecasts the exemption – also available on fully-electric cars, but with no expiry date – will cost three times more in lost tax revenue than first planned, at $760 million over its first four years.
The FBT exemption will continue beyond April 1 on battery-electric cars under the LCT threshold.
But it has always been planned to expire for PHEVs not locked into a “binding financial commitment” with a customer – indicating the final contract of sale – from that date.
“The reason we won’t extend it or reverse that is because, frankly, it was a matter of good faith between me and the crossbench to get it through,” Chris Bowen, Minister for Climate Change and Energy, said in response to a question from Drive at Sydney’s Everything Electric expo last week.
MORE: Extending FBT exemption on plug-in hybrids ‘critical’ to success of Ford Ranger PHEV, BYD Shark
“The Greens and the crossbench made that a requirement of voting for the electric vehicle [FBT] tax cut in the first place.
“They said, ‘We’ll only vote for it if you promise to lift it from plug-in hybrids in April 2025.’ I agreed to that to get it through. Because the Liberals opposed and I had to get it through. So therefore you have to compromise.
“Having made that compromise, I can’t in good faith say to the Greens and the crossbench, ‘Oh, I’ve changed my mind’ … That would be bad negotiation.
“I didn’t want to lift it off plug-in hybrids, I had to do it to get the legislation through or there would’ve been no tax cut at all. And having done that, you’ve got to stick to it.”
MORE: 2025 BYD Shark 6 set for healthy Australian supply before PHEV FBT exemption ends
Calls from the car industry to extend the FBT exemption for PHEVs have ramped up in recent months with the arrival of new models that have assisted a boom in demand.
Among them is the BYD Shark 6, the country’s first plug-in hybrid ute, which recorded more than 5500 pre-orders before the first deliveries in mid-January, since which time more than 2000 have reached customers.
The BYD Sealion 6 was the country’s most popular PHEV last year, outselling the Mitsubishi Outlander PHEV despite only launching in June.
Plug-in hybrid vehicle sales doubled last year compared to 2023, and are up 222 per cent so far this year – including a 346 per cent spike last month.
MORE: Australia's best-selling plug-in hybrid cars in 2024, with a surprise upset at the top of the charts
Even when PHEVs on sale this year that weren’t in showrooms this time last year are removed, sales last month were still up by about 30 per cent.
David Smitherman, CEO of BYD’s Australian distributor EVDirect, told Drive last month the company would like to see the FBT exemption for PHEVs extended.
“I think it makes sense. Absolutely. I ask myself the question, what’s the purpose of that legislation? It’s to help with the energy transition, and it’s clearly working. So absolutely it should be extended.
“Particularly for the technology we’ve embraced, which is battery-first technology. You can drive our cars as full EVs, and I feel as though that should be recognised in the legislation. It’s not.”
He predicted a dip in demand for PHEVs once the exemption expires, but played down its significance.
“We’re working really hard to meet that demand [for PHEVs under novated leases] because it’s exceptionally high.
“So I’d expect there’d be some slowdown, I guess. But that’s where we’ve got to just build the awareness for Shark because I think it’s better than that.”
Smitherman estimated about 30 per cent of Shark 6 customers are purchasing through a novated lease, but cautioned he did not have “the hard facts” on hand at the time of Drive's interview.
Mitsubishi – now Australia’s second-biggest seller of plug-in hybrids, thanks to BYD’s growth – has also called for an extension.
“The Fringe Benefits Tax exemption for PHEVs has significantly accelerated the adoption of PHEV technology,” Mitsubishi Motors Australia Limited (MMAL) said in a written statement to Drive.
“No other vehicle propulsion type grew faster than PHEVs in 2024, with a 100.2 per cent year-on-year increase.
“To ensure the continued rapid uptake — which could potentially reduce emissions by up to 81 per cent, based on our 2024 PHEV ownership study — MMAL recommends extending this exemption beyond 1 April 2025 or introducing an alternative mechanism, such as upfront tax rebates of $6000 for individuals or businesses purchasing PHEVs.”
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