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Novated lease

Is a novated lease worth it for an EV in 2026?

Last checked: 19 October 2026 · 6 min read · By The EV Insider

Short answer: for many employees, yes. In 2026 eligible electric cars are exempt from fringe benefits tax (FBT), so the car and its running costs can usually be paid from your pre-tax salary. That's a real saving. Whether it's worth it for you depends on four things: your marginal tax rate, the interest rate and fees in the quote, the residual (balloon) payment at the end, and whether you'd be buying a car anyway. It's easy to hand some or all of the tax saving back through a high rate, a padded running-cost budget or add-ons you don't need.

This is general information, not tax or financial advice. Check your own numbers with a registered tax agent or your payroll team.

General information, not tax advice. Rules change and your circumstances differ. Check the ATO sources linked here and speak to a registered tax agent or your employer's payroll team before you decide.

How an EV novated lease saves tax

A novated lease is a three-way agreement between you, your employer and a lease provider. Your employer pays the lease and the running costs out of your salary, and the provider manages the budget. There's more on the basics in our novated lease and FBT guide.

A car provided this way normally attracts FBT. That's why most packages split your payments between pre-tax and post-tax pay, using what's called the employee contribution method, to cancel the FBT out. Eligible EVs are different. The ATO says no FBT is payable on private use of an electric car if all of these apply:

With no FBT to cancel out, the whole package can usually come from pre-tax pay. The exempt running costs include registration, insurance, repairs and maintenance, and electricity.

Two more points. Plug-in hybrids have generally not qualified since 1 April 2025, apart from existing arrangements. And luxury car tax applies above A$91,661 for fuel-efficient vehicles in 2026–27, so EVs priced above that threshold miss out.

A worked example (example numbers only)

Every figure in this section is an illustrative assumption. It isn't a quote and isn't meant to represent typical market rates. Your numbers will be different.

Example: A$13,500 a year of car costs Paid from after-tax pay Paid through an EV novated lease
Car costs A$13,500 A$13,500, packaged pre-tax
Income tax and Medicare levy saved None About A$4,320
Reduction in take-home pay A$13,500 About A$9,180

The saving comes from A$13,500 × 32% (the 30% tax rate plus the 2% Medicare levy). That's about A$4,320 a year, or about A$21,600 over five years. Those figures leave out any interest difference and the GST point. At the end of the lease you still owe the residual, A$14,065 in this example. Check whether GST is added to it. You can pay it, refinance it, or sell or trade the car to cover it.

How your income changes the result (same example costs)

Salary Approx. tax saved a year Approx. net cost a year
A$50,000 A$3,045 A$10,455
A$100,000 A$4,320 A$9,180
A$160,000 A$5,265 A$8,235
A$200,000 A$6,065 A$7,435

Our calculation, using 2026–27 resident rates and a flat 2% Medicare levy. It ignores tax offsets, HELP and the Medicare levy surcharge. Higher earners save more because each packaged dollar would otherwise be taxed at a higher rate.

The costs people miss

When it's less likely to be worth it

The 2027 timing question

The full exemption continues until 31 March 2027. In the May 2026 Budget the Government announced changes from 1 April 2027. EVs costing A$75,000 or less keep a 100% discount until 2029, while dearer EVs under the luxury car tax threshold get 25%. These changes are not yet law, and the Government says existing leases won't be affected. Our explainer covers what happens to the EV FBT exemption after March 2027.

How to check a quote

  1. Get the vehicle price, the amount financed, the interest rate, all fees, the residual and each running-cost line in writing.
  2. Compare the finance part against an ordinary car loan quote.
  3. Work out your tax saving at your own marginal rate.
  4. Ask the questions in our lease inclusions checklist.
  5. Check our deals page for dated, sourced offers.

FAQ

Is a novated lease cheaper than buying an EV outright?

Not always. If you'd pay cash, compare the lease's total cost (payments, fees and the residual, less the tax saved) with the cash price plus running costs paid from after-tax pay. Remember the interest your cash could have earned.

Do I pay FBT on an EV novated lease in 2026?

Not if the car meets the ATO's conditions for the electric car exemption. The benefit is still reportable on your income statement.

Does the 5.47 cents per km home charging rate matter?

For FBT years starting on or after 1 April 2026, the ATO's shortcut rate for home charging is 5.47 cents per km. Some providers use it for charging reimbursements. Our charging costs page explains how to compare it with your actual tariff.

What happens if I leave my job?

The lease stays with you. If your new employer won't take it on, you'll keep paying from after-tax income. You could also end the lease early, which can mean termination costs.

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Sources

Last checked: 19 October 2026. General information only, not tax, financial, legal or credit advice. We don’t recommend any provider; where businesses are named, it’s for information. See our affiliate disclosure.