EV novated leases and the FBT exemption

Last checked: 17 October 2026.

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.

What is a novated lease?

A novated lease is a three-way agreement between you, your employer and a lease provider. Your employer pays the car costs from your pay, usually part pre-tax and part post-tax. The lease stays with you if you change jobs, but your new employer must agree to continue the arrangement.

The current EV exemption

According to the ATO, you do not pay fringe benefits tax (FBT) on private use of an eligible electric car if all of these apply:

The car is a battery electric or hydrogen fuel cell car (a zero or low emissions vehicle).
It was first both held and used on or after 1 July 2022.
It is used by a current employee or their associates.
Luxury car tax has never been payable on the car.

Benefits under a salary packaging arrangement are included. Registration, insurance, repairs, maintenance and charging electricity are exempt associated expenses. The benefit is still a reportable fringe benefit, which can affect some income-tested items. A home charging station itself is not covered as a car expense.

Source: https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax/types-of-fringe-benefits/fbt-on-cars-other-vehicles-parking-and-tolls/electric-cars-exemption (ATO page last updated 1 April 2026).

Plug-in hybrids

From 1 April 2025, plug-in hybrids are generally not eligible, apart from limited grandfathering. Source: https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax/types-of-fringe-benefits/fbt-on-cars-other-vehicles-parking-and-tolls/fbt-on-plug-in-hybrid-electric-vehicles

Proposed changes from 1 April 2027 (not yet law)

The 2026–27 Budget announced that the full exemption continues to 31 March 2027. As announced, from 1 April 2027 to 1 April 2029 EVs costing A$75,000 or less keep a 100% discount, and EVs above that but under the luxury car tax threshold get a 25% discount. From 1 April 2029, all EVs under the threshold get a 25% discount. Existing leases are reported as not affected. Legislation may change these details.

Luxury car tax threshold

For 2025–26 the threshold for fuel-efficient vehicles was A$91,387 (A$80,567 for others), per the Green Vehicle Guide: https://greenvehicleguide.gov.au/pages/LowAndZeroEmissionVehicles/ElectricVehicleInformation. Check the current-year figure before relying on it.

What to ask before you sign

What interest rate is built into the quote, and is it shown as a rate?
What fees and commissions does the provider receive?
What is the residual (balloon) value, and how was it set?
Are insurance, servicing, tyres and charging included, and at what mark-up?
What happens if you leave your job or the car is written off?

One industry study found many novated quotes omit or understate the rate: https://millarx.com.au/learn/novated-lease-rate-disclosure-study. The AFIA Code of Practice has a novated leasing schedule: https://www.afia.asn.au/finance-code/schedule-2-novated-leasing (check its effective date).

Government overview of EV support: https://www.energy.gov.au/electric-vehicles/buying-electric-vehicle/government-support-buying-evs