EV Novated Lease Tax Benefits Australia 2025-26: The Complete Guide
Electric vehicles are booming in Australia, and one of the biggest reasons is the generous FBT exemption for electric cars under a novated lease. If you've been eyeing a Tesla, BYD, or any other EV, a novated lease could save you thousands — potentially $5,000 to $15,000+ per year compared to buying outright. This guide explains exactly how the electric car novated lease tax benefits work in FY 2025-26 and helps you decide if it's the right move for you.
💡 Quick Summary
- ✅ Zero-emission EVs are exempt from Fringe Benefits Tax (FBT) under novated lease
- ✅ Vehicle price must be below the luxury car tax threshold for fuel-efficient vehicles ($91,387 for FY 2025-26)
- ✅ Lease payments come from pre-tax salary, reducing your taxable income
- ✅ Running costs (charging, insurance, rego, tyres) can also be salary packaged
- ✅ Use our EV Novated Lease Calculator to estimate your exact savings
What Is the FBT Exemption for Electric Vehicles?
In November 2022, the Australian Government introduced the Treasury Laws Amendment (Electric Car Discount) Bill 2022, which provides a full Fringe Benefits Tax (FBT) exemption for eligible electric vehicles provided through salary packaging arrangements like novated leases. This exemption applies from 1 July 2022 onwards and has no current sunset date.
Under normal circumstances, when your employer provides you with a car (or makes lease payments on your behalf), this is considered a fringe benefit and is subject to FBT at a rate of 47%. This FBT cost is typically passed on to the employee, significantly reducing the tax advantage of a novated lease. However, with the EV exemption, this entire FBT liability is eliminated for qualifying vehicles.
To put this in perspective: on a $55,000 EV with a 5-year lease, the FBT exemption alone can save you roughly $4,000 to $6,000 per year. Combined with the pre-tax salary deductions, the total savings can be substantial — which is why EV novated leases have become one of the most popular salary packaging options in Australia.
Which Vehicles Qualify?
To be eligible for the FBT exemption, a vehicle must meet all of the following criteria:
- Zero or low emissions: Battery electric vehicles (BEVs), plug-in hybrid electric vehicles (PHEVs) that were provided under a commitment made before 1 April 2025, and hydrogen fuel cell vehicles
- First held and used on or after 1 July 2022: The vehicle must not have been previously owned or leased (i.e., it must be a new or demonstrator vehicle at the time of the first novated lease arrangement)
- Below the luxury car tax threshold for fuel-efficient vehicles: For FY 2025-26, this is $91,387 (car value at the time of first use)
⚠️ PHEV Change from April 2025
Plug-in hybrid electric vehicles (PHEVs) are only FBT-exempt if the arrangement was entered into before 1 April 2025. New PHEV novated leases from April 2025 onwards will not qualify for the exemption. Full battery electric vehicles (BEVs) remain fully exempt with no end date.
How Does an EV Novated Lease Save You Money?
An EV novated lease saves you money through three key mechanisms:
1. Pre-Tax Salary Deductions (Income Tax Savings)
Lease payments and running costs are deducted from your gross (pre-tax) salary. This reduces your taxable income, which means you pay less income tax. The higher your marginal tax rate, the greater the benefit.
For example, if you earn $100,000 and your total novated lease costs are $18,000/year, your taxable income drops to $82,000. At the 30% marginal rate (FY 2025-26), that's approximately $5,400 in income tax savings per year.
2. FBT Exemption (Zero FBT on EVs)
With a traditional (petrol/diesel) novated lease, the fringe benefit creates a significant FBT liability that erodes your savings. With an eligible EV, this FBT is completely eliminated. This is the single biggest advantage of an EV novated lease over a conventional car lease.
3. GST Savings
Your employer can typically claim back the GST on the vehicle purchase price and running costs. This effectively gives you a ~10% discount on the car price and ongoing expenses. On a $55,000 vehicle, that's around $5,000 in GST savings alone.
EV Novated Lease Savings Example
Let's walk through a real-world example to show how the numbers work:
Scenario: Tesla Model 3 on Novated Lease
- Annual salary: $100,000
- Vehicle: Tesla Model 3 RWD — $55,000 (drive-away)
- Lease term: 5 years
- Annual running costs: ~$4,500 (charging, insurance, rego, maintenance, tyres)
- Residual value: ~$19,250 (35% of vehicle cost)
Estimated Annual Savings:
- Income tax savings: ~$5,400/year
- FBT exemption savings: ~$4,800/year
- GST savings: ~$1,100/year
- Total estimated savings: ~$11,300/year ($56,500 over 5 years)
These are estimates — your actual savings depend on your salary, tax situation, and vehicle choice. Use our EV Novated Lease Calculator to get a personalised estimate based on your specific circumstances.
Who Should Consider an EV Novated Lease?
An EV novated lease can be an excellent option, but it's not for everyone. Here's who benefits the most:
✅ Ideal Candidates
- Employees earning $70,000+ per year — Higher income means higher marginal tax rate and greater savings
- People planning to buy a new car anyway — If you need a car, a novated lease is almost always cheaper than buying outright for an EV
- Those with access to home or workplace charging — Running costs for EVs are dramatically lower than petrol cars
- Employees with supportive employers — Your employer must agree to offer novated leasing (most medium-to-large employers do)
- Those who drive less than 40,000 km/year — Standard lease terms work well for typical driving patterns
❌ May Not Be Suitable For
- Self-employed or sole traders — Novated leases require an employer-employee relationship. Consider other tax deductions instead
- Those earning under $45,000 — Tax savings may be minimal at lower income levels
- People who change jobs frequently — While portable, transferring a novated lease between employers adds complexity
- Those who prefer to own cars long-term (10+ years) — Novated leases typically run 1-5 years with a residual payment at the end
How to Calculate Your EV Novated Lease Savings
Calculating EV novated lease savings involves several variables. Here's a step-by-step breakdown:
Step-by-Step Calculation
- Determine your annual lease cost: Vehicle price minus residual value, divided by lease term, plus finance charges
- Add annual running costs: Charging (~$600-$1,200), insurance (~$1,500-$2,500), registration (~$300-$800), maintenance (~$300-$500), tyres (~$300-$500)
- Calculate total annual packaging amount: Lease cost + running costs = total pre-tax deduction
- Calculate income tax saving: Total packaging amount × your marginal tax rate
- Add GST savings: Approximately 1/11 of the GST-inclusive costs
- FBT savings: For eligible EVs = $0 FBT (full exemption)
- Compare with buying outright: Total cost via novated lease vs. paying with after-tax dollars
Sound complex? That's why we built the EV Novated Lease Calculator — it does all the maths for you in seconds. Just enter your salary, vehicle price, and lease term, and it shows your estimated savings compared to buying outright.
Frequently Asked Questions
Can I novated lease a used electric car?
The FBT exemption only applies to vehicles that were first held and used on or after 1 July 2022. This means the car must be new (or a demonstrator) at the time of the first novated lease arrangement. You cannot get the FBT exemption on a second-hand EV that was previously privately owned. However, you can still novated lease a used EV — you just won't get the FBT exemption, so the savings will be significantly less.
What happens if I leave my job?
Novated leases are portable. If you leave your employer, you have several options: transfer the lease to your new employer (most common), take over the lease payments personally, or pay out the remaining lease balance. Most lease providers will work with you to ensure a smooth transition. The FBT exemption continues as long as the lease is novated to an employer.
What happens at the end of the lease?
At the end of your lease term, you'll need to deal with the residual value — a balloon payment set at the beginning of the lease (typically 25-40% of the vehicle value). You can: pay the residual and own the car outright, refinance the residual into a new lease, trade the car in and start a new lease on a different vehicle, or return the car (if the lease agreement allows).
Does an EV novated lease affect my HECS/HELP repayments?
Yes — because a novated lease reduces your taxable income, it may also reduce your compulsory HECS-HELP repayments. However, the ATO uses your "repayment income" which includes your taxable income plus any reportable fringe benefits. Since EVs are FBT-exempt, there are no reportable fringe benefits to add back, making the HECS reduction genuine and not just cosmetic.
Are Tesla vehicles eligible?
Yes — all Tesla models (Model 3, Model Y, Model S, Model X) are fully battery electric vehicles and qualify for the FBT exemption, provided the vehicle value is below the luxury car threshold ($91,387 for FY 2025-26). The Model 3 and Model Y base variants are particularly popular for novated leases as they fall well within the threshold.
Can I include a home charging station in the lease?
Generally, a home charging station (wallbox) is not included in the novated lease itself, as it's considered a home improvement rather than a vehicle running cost. However, some employers may offer it as a separate salary packaging benefit. Check with your employer or lease provider about options for packaging a home charger.
Is there a limit on how many EVs I can lease?
There is no legislated limit on the number of FBT-exempt EVs an individual can lease. However, practically speaking, your employer needs to agree to the arrangement, and your salary needs to be sufficient to cover the lease payments. Each vehicle must independently meet the eligibility criteria (new, below the luxury car threshold, zero/low emissions).
Popular EVs for Novated Leasing in Australia
Here are some of the most popular electric vehicles for novated leasing in Australia, all falling under the $91,387 luxury car threshold:
| Vehicle | Approx. Price | Range (km) | Est. Annual Saving* |
|---|---|---|---|
| BYD Atto 3 | ~$45,000 | 420 | $8,000 - $12,000 |
| Tesla Model 3 RWD | ~$55,000 | 510 | $9,000 - $13,000 |
| Tesla Model Y RWD | ~$58,000 | 455 | $10,000 - $14,000 |
| Hyundai Ioniq 5 | ~$60,000 | 451 | $10,000 - $14,000 |
| Kia EV6 | ~$65,000 | 528 | $11,000 - $15,000 |
| BYD Seal | ~$50,000 | 520 | $9,000 - $13,000 |
*Estimated savings on $100,000 salary with 5-year lease. Use the calculator for accurate figures.
Key Considerations Before Signing Up
- Residual value risk: At the end of the lease, the car may be worth less than the residual. However, with strong EV demand in Australia, resale values have been relatively stable
- Early termination costs: Breaking a novated lease early can incur significant penalties. Make sure you're comfortable with the full lease term
- Impact on borrowing capacity: Some lenders consider novated lease commitments when assessing your borrowing capacity for home loans. Factor this in if you're planning to buy property
- Employer requirements: Not all employers offer novated leasing. Check with your HR department before shopping for a car
- Charging infrastructure: Ensure you have reliable charging access — either at home, at work, or through public networks near your regular routes
Calculate Your Savings Now
Ready to see how much you could save?
Our EV Novated Lease Calculator gives you a personalised estimate in seconds. Enter your salary, choose your EV, and see the tax savings breakdown.
Try the EV Novated Lease Calculator →Related Resources
- EV Novated Lease Calculator — Get your personalised savings estimate
- Novated Lease Calculator Guide — General novated lease information (all vehicles)
- Salary Sacrifice Calculator — Explore other salary packaging options
- Take-Home Pay Calculator — See how a novated lease affects your net pay
- Income Tax Calculator — Check your current tax position
- Car Lease Calculator — Compare standard car leasing options
Disclaimer: This guide is for general information purposes only and does not constitute financial advice. Tax savings estimates are approximate and based on FY 2025-26 tax rates. Your actual savings will depend on your individual circumstances, including your income, tax situation, vehicle choice, and lease terms. We recommend consulting with a qualified financial adviser or tax professional before entering into a novated lease arrangement. Information about the FBT exemption is based on current legislation and may change. Last updated: March 2026.