In brief
This year’s budget contained measures related to renewables. This funding intends to bolster Australia's energy transition journey by providing targeted renewable capital gains tax relief, a phased tax rollback for electric vehicles, and various other regulatory reforms.
Key takeaways
The 2026–27 Federal Budget (“Budget”) confirms the Federal Government’s aims to attract foreign capital into Australia’s renewable energy sector while continuing to refine electric vehicle (EV) incentives and energy market regulation settings.
One of the key measures includes the introduction of a time limited 50% capital gains tax (CGT) discount for foreign investors disposing of eligible renewable energy assets or qualifying indirect interests. This change is reliant on the passing of the Government’s proposed Treasury Laws Amendment (Foreign Resident CGT Concessions for Renewable Energy) Bill 2026 (Cth). If this legislation is passed, the concession would apply from the date of commencement of the relevant Act until 30 June 2030. The concession is limited in its application to foreign companies and trustees (excluding individuals). Importantly, the new regime would capture development-stage projects (where supported by evidence) and apply look through treatment for interposed entities, while maintaining existing anti avoidance rules under Part IVA of the Income Tax Assessment Act 1936 (Cth). The measure is explicitly framed as a capital attraction tool, albeit with an estimated AUD 425 million revenue cost already provisioned.
In parallel, the Government is phasing down EV fringe benefits tax (FBT) concessions from April 2027, signaling a shift from early stage market stimulation to gradual normalisation. While existing benefits are preserved in the short term, the regime becomes more restrictive over time (particularly as it applies to “luxury" EVs) before transitioning to a uniform, reduced concession for sub threshold vehicles by 2029.
On the energy market side, the Budget focuses on system integration rather than large new spending. This includes funding for a National Technical Regulator to standardise rules for consumer energy resources (e.g., solar, batteries, EVs), alongside support for the implementation of National Electricity Market (NEM) wholesale market reforms which were announced last year.
Finally, other green energy funding measures includes a boost to funding for battery inspection compliance under the Cheaper Home Batteries program and funding reallocation in relation to the Government’s previously announced solar panel recycling pilot. See our full Budget Bite for details below.
In more detail
Transitional measures announced for Foreign Resident Capital Gains Tax
As foreshadowed by the release of draft legislation on 10 April 2026 and covered in our Client Alert “Australia: Expands the Foreign Resident CGT Net”, the Government has confirmed their time-limited concession in the foreign resident CGT regime to encourage investment in the renewables sector. If the Treasury Laws Amendment (Foreign Resident CGT Concessions for Renewable Energy) Bill 2026 (Cth) passes, these arrangements provide a 50% CGT discount for eligible foreign investors disposing of Australian renewable energy infrastructure assets or qualifying indirect interests in those assets from the date of commencement (the first day of the next quarter after Royal Assent) until 30 June 2030.
The discount, which is available to foreign resident companies and trustees of foreign trusts (but not foreign resident individuals) would apply independently of the existing CGT discount regime available to resident taxpayers.
For direct disposals to receive the benefit of the discount, the asset must primarily generate, or directly facilitate the generation of, electricity from an eligible renewable energy source (as defined in the Renewable Energy (Electricity) Act 2000 (Cth)).
For indirect disposals (i.e., membership interests) to receive the benefit of the discount, the relevant interest must be an “Indirect Australian Real Property Interest” and satisfy a renewable energy asset test i.e., at least 90% of the entity’s “Taxable Australian Real Property” value must be attributable to renewable energy assets.
The concession is designed to support continued capital inflows into the renewables sector, with the Government stating in the Budget Papers that it is “estimated to decrease receipts by AUD 425 million over five years from 2025–26 and was accounted for in a prior Budget process” (Budget 2026-27, p15).
Fringe Tax Benefits for Electric Vehicles
As foreshadowed by Treasurer Jim Chalmers and Energy Minister Chris Bowen in a joint statement on 5 May 2026, the government will begin a phased decrease in the EV fringe benefits tax subsidy to apply from 1 April 2027.
The wind back is staggered in three phases:
- Existing EV discounts will continue in full until the end of March 2027.
- Between 1 April 2027 and 1 April 2029, the fringe benefits tax discount on EVs worth more than AUD 75,000 will be lowered to 25%, while EVs costing less than AUD 75,000 will receive the full fringe benefits tax exemption until the end of this transitional period (31 March 2029).
- From 1 April 2029, all EVs below the luxury car tax threshold (priced under AUD 91,387) will be moved onto the lower 25% discount. “Luxury” EVs will continue to have to pay the full fringe benefits tax, as will used EVs from before July 2022.
In other EV news, the Budget noted plans to reprofile AUD 15.4 million over four years from 2025-26 to expand the Dealership and Repairer Initiative for Vehicle Electrification Nationally program and extend the program for an additional year.
Modernising energy markets
In Budget Paper 1, the Australian Government restated its commitment to working with NEM participant states and territories to introduce significant NEM reforms. This follows the release of the independent review of the NEM wholesale market settings in November 2024, which focused on strengthening market incentives and preserving competition to facilitate Australia’s energy transition to renewable energy supply.
Specific commitments relating to the “consumer and community benefits of the energy transition” include:
- AUD 97.2 million to establish a Consumer Energy Resources National Technical Regulator, which will set the technical requirements to allow consumers to benefit from their solar, battery and EV infrastructure supporting the grid. This forms part of the ongoing implementation of the Government's’ National Consumer Energy Resources Roadmap.
- AUD 15.9 million over four years from 2026-27 for the Australian Energy Regulator to implement recommendations of the National Electricity Market wholesale market settings review released in December 2025.
Modest boost for the Cheaper Home Batteries Program
Separately, the Government has committed AUD 14.6 million to the Cheaper Home Batteries (CHB) program over five years from 2025-26 (and AUD 0.7 million in 2030-31) to “maintain proportionate battery systems inspections” under the CHB.
Rerouting funds to Solar Panel Recycling Pilot payments
The Government will provide AUD 24.7 million over three years from 2025–26 to pilot a national solar panel recycling scheme, including up to 100 collection sites to reduce panels going to landfill and recover valuable materials. The measure is not new, having been previously announced in the 2025-56 Mid-Year Economic and Fiscal Outlook. Budget 2026-27 re-prioritises the funding in existing programs, with Treasury administering payments for the scheme to states and territories.
A copy of the Federal Budget papers can be found here.
Lauren Lancaster, Graduate at Law, Jeremy Hyman, Head of Communications, and Sky Friend, Business Development Consultant, have contributed to this legal update.