In the ACT, plug-in hybrids now make up roughly 1 in 4 plug-in vehicle sales, down from a much larger share in prior years, while full battery EVs have climbed to 43.5% of the market on their own. Industry commentary has largely put this down to buyer psychology: people feeling comfortable enough with battery-only technology to stop “hedging their bets” with a hybrid. That’s part of the story. But it skips over a much harder, more measurable reason the numbers moved the way they did, and it happened on a specific date: 1 April 2025.
Quick Summary
- The Fringe Benefits Tax (FBT) exemption for plug-in hybrids ended on 1 April 2025, while full battery EVs kept theirs, instantly changing the salary-packaging maths in favour of BEVs.
- PHEV sales spiked sharply in the weeks before the deadline as buyers rushed to lock in the exemption, then fell away once it lapsed.
- The EV FBT exemption itself is now under federal review, with a decision possible at any time, so the policy gap between PHEVs and BEVs could shift again.
The tax change that quietly reshaped the market
Since 2022, Australia’s Electric Car Discount has waived Fringe Benefits Tax on eligible zero and low-emissions vehicles bought through a novated lease, originally covering battery EVs, hydrogen fuel-cell vehicles, and plug-in hybrids. From 1 April 2025, the ATO removed PHEVs from that exemption entirely. New PHEV novated leases are now taxed the same way as a standard petrol car, while BEVs kept the full exemption.
The financial gap this created is not small. Industry modelling around the deadline showed a buyer locking in a PHEV novated lease before 1 April could be roughly $12,000 better off over the lease term than someone signing an identical deal a day later. For higher earners, the annual difference on a single vehicle ran into the thousands. That’s not a shift in vibes or sentiment, it’s a straightforward change in what a PHEV costs a salary-packaging buyer relative to a BEV.
Expert Tip: If you’re comparing a PHEV and a BEV purely on sticker price, you’re missing the bigger number for most salary-packaged buyers. Run both through a novated lease calculator with current FBT rules applied. The gap is frequently larger than any difference in the vehicles’ retail price.
The rush-then-drop pattern in the sales data
The lead-up to the deadline produced a predictable spike. PHEV sales roughly doubled in the prior year off a low base, and in the first two months of 2025 alone, Australians bought thousands of PHEVs, with a large share going through novated lease arrangements specifically to beat the cutoff. Once the exemption lapsed, that incentive to buy a PHEV right now disappeared, and the underlying demand it had been pulling forward went with it. What looks in hindsight like a gradual “falling PHEV share” was, in large part, a policy-driven spike followed by a policy-driven drop.
This matters because it changes how the ACT and national PHEV-to-BEV ratios should be read. A declining PHEV share isn’t purely evidence that Australians are more comfortable with battery-only technology now (though that’s a real, separate trend). A meaningful chunk of it is the direct, mechanical result of removing a tax incentive that specifically favoured PHEVs over BEVs for salary-packaged buyers, a segment that has historically driven a large share of new vehicle sales in Australia.
Expert Tip: If you already locked in a PHEV novated lease before 1 April 2025, be careful with anything that counts as a “material change,” refinancing, extending the lease, taking extended unpaid leave, or changing employers can all reset your eligibility and trigger FBT from that point, according to ATO guidance.
Is a PHEV still worth it if you’re not salary packaging?
Outside a novated lease, the FBT change doesn’t apply, and a PHEV can still make sense for some buyers, particularly those without reliable home charging access or covering longer regional distances where charging infrastructure is patchier. But the calculus has shifted. Where PHEVs used to compete with BEVs on close-to-equal tax footing, they now compete on running costs and purchase price alone, and BEVs generally win that comparison too once fuel savings are factored in over a few years of ownership.
Expert Tip: If you’re weighing a PHEV mainly because you’re nervous about range, check actual usage first. Most Australian households drive well within a modern BEV’s real-world range on a typical week, and the “hedge your bets” case for a PHEV is weaker than it looks once you look at your own logbook rather than a worst-case road trip.
The policy settings could move again
It’s also worth knowing this isn’t necessarily settled. The broader EV Discount is under active federal review, running from February 2026 with a report due by mid-2027, driven partly by the scheme’s cost blowing out to an estimated $5.1 billion, well above original forecasts. A decision on the BEV exemption itself could land at any point during that window. Given how directly the PHEV cutoff moved sales behaviour in 2025, any change to the BEV exemption would likely produce a similar before-and-after effect, so buyers planning a novated lease purchase in the next year or two should factor that uncertainty in rather than assuming today’s settings are permanent.
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Frequently asked questions
When did the PHEV FBT exemption end in Australia? The exemption ended on 1 April 2025. PHEV novated leases settled and delivered before that date generally keep the exemption for the remaining lease term, provided no material changes are made to the arrangement afterwards.
Do battery EVs still get the FBT exemption? Yes, as of mid-2026, battery electric vehicles and hydrogen fuel-cell vehicles under the luxury car tax threshold still qualify for the FBT exemption through a novated lease. However, the scheme is under federal review, with a decision possible at any time.
Why did PHEV sales spike just before April 2025? Buyers rushed to sign and settle novated leases before the deadline to lock in the FBT exemption, which was worth thousands of dollars over a typical lease term. This pulled forward demand that then dropped sharply once the exemption ended.
Is a PHEV still a good option if I’m not using a novated lease? It can be, particularly for buyers without reliable home charging or covering long regional distances. Outside salary packaging, the financial comparison is closer, though BEVs typically still offer lower running costs over ownership.
Does the falling PHEV share mean Australians are losing interest in electrified vehicles overall? No. Combined BEV and PHEV sales are still climbing nationally. The shift reflects buyers moving from PHEVs specifically toward BEVs, driven by both the FBT policy change and growing comfort with battery-only technology.
Key takeaways
- The PHEV FBT exemption ended 1 April 2025, while the BEV exemption continued, creating a direct financial incentive favouring battery EVs for salary-packaged buyers.
- PHEV sales spiked sharply in the weeks before the deadline, then fell once the exemption lapsed, a policy effect that’s easy to mistake for a pure sentiment shift.
- Falling PHEV share in markets like the ACT reflects both this tax change and genuine growing comfort with BEV technology, not one cause alone.
- Outside a novated lease, PHEVs can still suit buyers without reliable home charging or covering long regional routes.
- The EV Discount scheme is under federal review through mid-2027, so today’s BEV exemption settings aren’t guaranteed to hold, worth factoring into any near-term purchase timing.
