Australian motorists seeking to acquire a plug-in hybrid vehicle (PHEV) through a novated lease now face a policy change that could result in additional costs.

As of 1st April 2025, PHEVs are no longer eligible for the Fringe Benefits Tax (FBT) exemption, whereas fully battery electric vehicles (EVs) will continue to receive the tax concession indefinitely.

Introduced in July 2022, the FBT exemption allowed Australians to reduce the cost of purchasing an electric or plug-in hybrid vehicle through salary packaging.

By covering the cost that would typically be an employer's FBT liability, the government reduced the financial burden on buyers, with some saving up to five figures annually.

However, while EVs will continue to receive this tax advantage, the FBT exemption for PHEVs was set to expire on 1st April 2025. With this deadline now passed, any PHEV acquired through a novated lease will no longer qualify for the tax relief.

According to data from the National Automotive Leasing and Salary Packaging Association (NALSPA), over 100,000 novated leases have been taken out for eligible EVs and PHEVs since the programme's inception.

The adoption of EVs in Australia has increased, rising from 1.8% of the new car market when the scheme was introduced to 7.4% by the end of 2024.

PHEVs have also seen growth, increasing from below 1.0% to nearly 2.0% of the market.

Although EVs have outsold PHEVs, early 2025 saw a 222.2% increase in plug-in hybrid sales compared to the same period in 2024. This increase is likely due to consumers purchasing PHEVs before the tax exemption expired.

The introduction of new models from manufacturers such as BYD, which launched the Sealion 6 mid-size SUV last year and the Shark 6 utility vehicle (pick-up truck) in early 2025, has contributed to higher PHEV sales. It remains uncertain whether this trend will continue without the FBT exemption.

With the tax benefit still in place for fully electric vehicles, some potential PHEV buyers may now consider EVs instead. This could further increase EV adoption, as financial incentives remain in place.

The removal of the FBT exemption for PHEVs reflects a shift in government policy towards fully electric vehicles rather than hybrid models.

For those considering a PHEV or an EV, the financial impact of this policy change may influence purchasing decisions. The availability of new EV models and improvements in charging infrastructure may also play a role in consumer choices.