The Australian government will pocket almost $2bn after slamming the brakes on a lucrative electric vehicle incentive supercharging green vehicle sales.

The Electric Vehicle Discount introduced in 2022 made battery-powered cars cheaper to lease by waiving the Fringe Benefits Tax usually applied to vehicles bought through salary sacrifice arrangements.

Credited with putting around 100,000 EVs on Australian roads, the policy made electric hatchbacks the cheapest cars in Australia to lease, at about $150 per week.

It ensured that a $75,000 Tesla costs about $200 per week less to lease than an equivalent petrol-powered car and proved significantly more successful than originally expected, particularly for high income earners.

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Changes to the discount made public last week see it extended until April next year before it becomes less generous.

Budget papers released on Tuesday show the government expects to reap an additional $1.9bn in the next five years as a result of the change, predicting that people will keep choosing green vehicles while paying more tax.

The move helps pay for a $2.9bn reduction in revenue brought on by a temporary halving of the fuel excise, and reduced heavy vehicle road user charges, triggered by conflict in the Middle East this year.

Rapid, engaging and fun to drive, this electric Hyundai thrilled David McCowen at Sydney Motorsport Park.

The EV Discount reforms involved a phased reintroduction of Fringe Benefits Tax for electric vehicles.

From April 1 next year, premium EVs that cost more than $75,000 will incur 75 per cent of the normally payable FBT, a deal that will apply to all EVs from April 1, 2029.

The government said its changes “continue targeted support for the shift to electric cars, while ensuring the sustainability of the system in the long term”.

Tweaks to the luxury car tax that help prestige car customers save almost $9500 in tax on electric cars that cost more than $91,387 are predicted to cost the government $90m in the next two years.

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Low-carbon fuels, such as bio-fuels grown from seawater in a program backed by the CSIRO in Tasmania, benefit from $1.1bn in funding already announced by the government.

A $1bn fund for renewable hydrogen projects continues to have government support.

Other elements in the green vehicle space in this year’s budget include $40.5m to help the Australia Post fleet transition toward electric vehicles, and $40m for kerbside and regional electric vehicle chargers.

The government is also extending a minor funding program intended to help regional car dealerships and workshops adapt to electric vehicles.

Known as the Dealership and Repairer Initiative for Vehicle Electrification Nationally, or DRIVEN, the program has reworked $15.4m over four years “to better meet industry needs”.