Federal Excise Duty on Luxury Vehicles and EVs: Budget 2026-27
Luxury on wheels now carries federal excise
Budget 2026-27 brings Federal Excise Duty (FED) onto luxury vehicles, including luxury electric vehicles (EVs) and imported luxury vehicles, through a new Table 1A in the federal excise framework. The message is that a high-end car is treated as discretionary spending, even when it is electric, and taxed that way.
What the new Table 1A does
Table 1A is how the budget applies FED to luxury vehicles, luxury electric vehicles and imported luxury vehicles. Instead of amending an existing schedule line by line, the government has created a separate table for this new category of excisable goods. The main points:
- Luxury vehicles now attract FED.
- Luxury EVs are named specifically. Being electric does not exempt a high-end vehicle.
- Imported luxury vehicles are covered.
Why luxury EVs are included
The government generally wants more EVs on the road, and elsewhere in Budget 2026-27 the EV CKD (completely-knocked-down) sales-tax exemption is extended to 30 June 2027. Supporting affordable, mass-market EVs is one thing, though, and subsidising luxury is another. Putting luxury EVs under FED keeps the incentives on affordable models, while premium electric cars pay revenue like any other luxury good.
A note on the policy balance
| EV-related measure | Budget 2026-27 treatment |
|---|---|
| EV CKD sales-tax exemption | Extended to 30 June 2027 (supports affordable EVs) |
| Luxury EVs (FED) | Now subject to FED under Table 1A |
Taken together, the two measures draw a clear line. Everyday EVs are encouraged and the luxury end is taxed.
What buyers and dealers should expect
- Higher all-in cost for luxury and luxury electric vehicles once FED is applied.
- Repricing by dealers to reflect the new excise.
- Clearer documentation of which models fall inside the luxury definition.
- Modernised administration: FED now sits alongside faceless audits, e-invoicing and production monitoring.
Getting the accounting right
Dealers handling luxury vehicles must apply FED correctly on top of any sales tax and withholding, reflect it in invoices, and keep audit-ready records for faceless excise audits. Zaffre Axon keeps this in one place. Zaffre Tech's platform sets up excise, sales tax and withholding once and applies them the same way across invoices and finance. The Zaffre HRM module keeps payroll, EOBI and allowances correct for showroom and back-office staff, so the whole business stays compliant.
Bottom line
Budget 2026-27's new Table 1A brings FED onto luxury vehicles and luxury EVs, while everyday EVs keep their CKD exemption to mid-2027. Dealers and buyers of premium vehicles should expect a higher all-in cost and tighter documentation.
References: Finance Act 2026 (Federal Budget 2026-27); Federal Excise Act 2005; Sales Tax Act 1990; FBR.
Book a demo of Zaffre Axon to see how Zaffretech keeps excise, sales tax and withholding compliant across every vehicle transaction.