Claiming an electric vehicle for business: the income tax rules for 2026–27

There is no special income tax deduction for electric vehicles in Australia. An EV is a car, and the normal car rules apply: depreciation capped at the car limit, running costs claimed for business use, and GST credits capped per car. What's different is the detail: how you claim electricity charged at home, how luxury car tax interacts with the price, and the FBT exemption that makes EVs attractive for companies and employees.

This guide covers the income tax side for sole traders and companies for 2026–27. If you're an employer providing a car, or an employee looking at a novated lease, our guide to FBT on cars and electric vehicles covers the FBT side in full, including the changes proposed from 1 April 2027.

Claiming an EV for business at a glance (2026–27)

Are electric cars tax deductible for business?

Yes, to the extent the car is used to earn business income. A business claims depreciation on the car's cost, up to the car limit, and the running costs: electricity, registration, insurance, servicing, tyres and interest on any loan. A sole trader claims only the business-use share. A company claims the full amount and accounts for any private use by employees or directors through FBT.

How much of an EV can you depreciate?

The cost you can depreciate is capped at the car limit, which is $69,883 for 2026–27 (ATO). It applies to EVs exactly as it applies to petrol cars. Anything you pay above the limit, including any luxury car tax, isn't deductible.

The instant asset write-off and EVs

A small business (aggregated turnover under $10 million) can write off an asset costing less than $20,000 in the year it's first used. Almost no new EV costs that little, so in practice an EV goes into the small business pool:

• 15% of the business-use share of the cost in the first year, wherever in the year you bought it
• 30% of the remaining balance each year after.

A second-hand EV under $20,000 can be written off in full (for the business share). If you're registered for GST, the $20,000 test uses the price excluding GST. Our instant asset write-off guide has the timing rules.

Businesses that don't use the simplified depreciation rules depreciate the car over its effective life instead, still on a cost capped at the car limit.

Leasing instead of buying

If you lease a car whose value is above the car limit, the lease is treated for tax as if you'd bought the car with a loan. You claim depreciation (on the capped cost) and a notional interest amount, not the lease payments. Below the car limit, lease payments are deducted in the normal way, for the business share. A chattel mortgage is a purchase with a loan: you claim depreciation and interest.

How does luxury car tax affect an EV?

Luxury car tax (LCT) is charged at 33% on the value of a car above the threshold, and it's built into the price the dealer charges you. For 2026–27 the threshold for fuel-efficient cars, which includes battery electric cars, is $91,661, against $80,809 for other cars (ATO). LCT matters for a business in three ways.

1. It's not separately deductible. LCT forms part of the car's cost, but cost above the $69,883 car limit isn't depreciable, so in practice the LCT is never deducted.
2. It's not a GST credit. You can't claim GST on the LCT, and the GST credit on the car is capped at $6,353 anyway.
3. It ends the FBT exemption. An EV is eligible for the FBT exemption only if LCT has never been payable on it. A company buying an EV over the threshold loses the exemption permanently, including for any later owner of that car.

Key point: The car limit ($69,883) and the luxury car tax threshold ($91,661 for EVs) are different numbers. An EV priced between them is fully FBT-exempt if eligible, but its depreciation still stops at $69,883.

Cents per km or logbook for an EV?

A sole trader or partnership can use either method for an EV. The cents per km method gives 91 cents per business kilometre for 2026–27, capped at 5,000 km (a maximum claim of $4,550), and the rate already covers electricity, depreciation and every other running cost. The logbook method gives the business-use percentage of actual costs, and usually wins for a new EV used heavily for business.

Companies don't use either method. A company claims its actual car costs in full.

How do you claim home charging electricity?

If you use the logbook method, you can claim the business share of the electricity used to charge the car at home. You can work it out from actual cost, using a separate meter or a smart charger that records usage, or use the ATO's EV home charging rate in PCG 2024/2 instead of separating the cost from your household bill.

Status of the rate as at 23 October 2026: PCG 2024/2 sets the EV home charging rate at 5.47 cents per kilometre for FBT years and income years starting on or after 1 April 2026, and 4.20 cents for earlier years (ATO, FBT rates and thresholds). For income tax, that means 4.20 cents in the 2025–26 return and 5.47 cents from 2026–27. The PCG allows the rate for car expenses claimed under the logbook method and for motor vehicle expenses claimed as general deductions, and the choice applies for the whole year, car by car. For a sole trader's business claim, we still check whether the shortcut or actual cost gives the better result before lodging.

How it works:

1. Keep a logbook and odometer readings at the start and end of the year.
2. Multiply the kilometres travelled in the year by the rate. Public charging is a separate cost, claimed from receipts; if you charge away from home often, check with us how the kilometres are counted so nothing is claimed twice.
3. Apply your logbook business-use percentage.
4. Keep at least one electricity bill for the home where the car was charged.

The rate is built for zero-emission cars (battery electric and hydrogen fuel cell). For a plug-in hybrid, the PCG lets you apply it only to the kilometres driven on electricity, estimated using a set method from your fuel costs and odometer readings, or you can use actual charging data. Talk to us before using it for a hybrid.

Home chargers and solar

A wall charger installed at home is usually a separate depreciating asset, not part of the car. A sole trader can claim the business-use share of its cost; at under $20,000 it can usually be written off in the year it's installed. If a company pays for a charger at a director's or employee's home, it isn't a car expense for FBT and may be a separate fringe benefit.

Not sure which way to claim charging? Ask us.

Can you claim GST credits on an electric vehicle?

Yes, if your business is registered for GST. The credit on a car is capped at one-eleventh of the car limit, which is $6,353 for 2026–27 (ATO). A sole trader claims only the business-use share; a company providing the car to an employee or director can generally claim the full credit. You also claim GST credits on charging, servicing and other running costs, again limited to business use for a sole trader. There's no GST credit for the luxury car tax, stamp duty or registration fees.

Claim the credit in the BAS for the period you buy the car, and use the GST-exclusive amount for your depreciation. Our BAS and GST service keeps the two in step.

When does FBT apply instead of income tax deductions?

FBT applies when an employer, including your own company or trust, lets an employee or director use a car privately. The business then claims the full cost of the car for income tax and pays FBT on the private benefit instead of apportioning. For an eligible EV, the FBT is currently nil.

A car qualifies for the electric car FBT exemption, as at 23 October 2026, if it is a zero or low emissions car (battery electric or hydrogen fuel cell; plug-in hybrids only under arrangements made before 1 April 2025), was first held and used on or after 1 July 2022, and luxury car tax has never been payable on it. The exempt value is still reported on the employee's income statement.

The Government announced in the 2026–27 Budget a revised FBT treatment of electric cars from 1 April 2027. An exposure draft was released in September 2026; it isn't law. Our FBT guide tracks the detail, and our FBT return service handles the return each year.

Worked example: sole trader vs company

Hypothetical, rounded, 2026–27. Figures exclude GST where a GST credit is claimed.

Say a consultant buys a new battery electric car for $66,000 including GST, below both the luxury car tax threshold and, after GST, the car limit. They drive 20,000 km a year, charged at home, and a logbook shows 75% business use. Running costs (excluding GST) are $1,800 insurance, $900 registration and $600 servicing and tyres, and loan interest is $3,200.

As a sole trader

The logbook gives an extra $8,065 of deductions in the first year, worth about $2,580 of tax at a 32% marginal rate. In year two the pool deduction rises to 30% of the remaining balance.

Through a company

The company claims the full $6,000 GST credit, then depreciation of $9,000 (15% of $60,000) and all running costs and interest, with no private-use reduction: about $15,500 in year one, plus the charging costs it pays or reimburses. Because the car is an eligible EV, there's no FBT on the director's private use, though the grossed-up value appears on their income statement. The trade-off is that a company pays tax at 25% (if a base rate entity) rather than at personal rates, and getting the car out of the company later needs to be done at market value. See our guide to Division 7A.

And a more expensive EV

Change the price to $110,000. The car now bears luxury car tax, so it's not FBT-exempt for a company. The GST credit stops at $6,353, and depreciation stops at the $69,883 car limit, so roughly $34,000 of the price (including the LCT) is never deductible. For many businesses, the jump in price above the LCT threshold costs far more in tax than the car's extra features are worth.

Mistakes we see with business EVs

1. Claiming home charging under cents per km. The 91 cent rate already includes electricity.
2. Depreciating the full price of an EV above the car limit.
3. Buying an EV over the luxury car tax threshold through a company, expecting the FBT exemption.
4. Claiming the full GST credit as a sole trader with private use, or above the $6,353 cap.
5. No logbook, so the claim is stuck at $4,550.
6. Treating the home charger as a car cost for FBT purposes.
7. Assuming a sole trader gets the FBT exemption. There's no FBT, and no exemption, for a sole trader's own car.

How BPAG helps

Most of the EV questions we get are really structure questions: who should own the car, who drives it, and what that does to the deductions, GST and FBT. We work it out before you sign the contract, not after.

Our depreciation agent builds the asset schedule with the car limit and pooling applied, and our FBT agent checks whether the car qualifies for the electric car exemption and values any benefit. Your accountant reviews both, confirms the logbook and charging records, and prepares your company tax return or personal return. The agents draft; a qualified accountant reviews and approves before anything is lodged.

If you run a fleet, our page for transport and logistics businesses covers vehicles more broadly, and our guide to sole trader tax deductions covers everything else you can claim.

General information only, current as at 23 October 2026. It is not personal tax, legal or financial product advice and doesn't take your circumstances into account. Talk to us before you act. Where a recommendation needs a licensed financial adviser or a solicitor, we work alongside them.