EV novated lease: how much can you save?
With a novated lease, your employer pays for the car and its running costs out of your pre-tax salary. Because EVs are exempt from fringe benefits tax, the whole cost comes out before income tax, which can save someone on $100,000 roughly $4,480 a year on $14,000 of lease and running costs. The exemption stays in full for EVs under the luxury car tax threshold until 31 March 2027; after that a phase-down has been proposed. Plug-in hybrids no longer qualify.
How a novated lease works
- You choose the car. A leasing company buys it, and you, your employer and the lessor sign a three-way agreement.
- Your employer deducts the lease payment and a budget for charging, servicing, tyres, rego and insurance from your salary before tax.
- Normally a car benefit attracts fringe benefits tax (FBT), so people pay part from after-tax pay to reduce it. Eligible EVs are exempt, so everything can be paid pre-tax.
- The lessor also claims back GST on the purchase price (up to a limit), which lowers the amount financed.
- At the end there's a balloon or "residual" payment set by the tax office: you pay it, refinance it, or hand the car back.
How much could you save?
An example only: $14,000 a year of lease payments and running costs for a mid-priced EV, paid from pre-tax salary, using 2026–27 tax rates including the 2% Medicare levy. The GST saving on the car comes on top.
| Salary | Paid pre-tax per year | Income tax saved per year | Per week |
|---|---|---|---|
| $55,000 | $14,000 | $3,880 | $74.62 |
| $100,000 | $14,000 | $4,480 | $86.15 |
| $150,000 | $14,000 | $5,460 | $105 |
Real savings depend on the car price, lease term, interest rate, fees and residual. Leasing companies' fees and margins vary a lot, so get two or three quotes and compare the total you'll pay, not just the weekly figure. The EV's value also counts as a "reportable fringe benefit", which can affect things like family payments and HELP repayments.
What's changing (2027 to 2029)
The May 2026 federal budget announced a phase-down of the EV exemption. Draft laws were released in September 2026 but have not yet passed Parliament, so details may change.
- Until 31 March 2027: full exemption for battery EVs priced under the fuel-efficient luxury car tax threshold ($91,387 in 2025–26; $91,661 in 2026–27).
- 1 April 2027 to 31 March 2029: full exemption for EVs up to $75,000; a 25% FBT discount for EVs between $75,000 and the threshold.
- From 1 April 2029: new leases get a 25% FBT discount for eligible EVs.
- Existing leases: keep their treatment until the lease ends, but refinancing, changing the lease or changing employer can count as a new commitment.
- Plug-in hybrids: lost the exemption for new leases from 1 April 2025.
EVs under $75,000
These keep the full exemption under the proposed rules from April 2027. Prices before on-road costs or drive-away, as listed.
BYD Atto 1 ($23,990), Geely EX2 ($26,490), BYD Dolphin ($29,990), Leapmotor B03X ($29,990), BYD Atto 2 ($31,990), MG4 ($31,990), GAC Aion UT ($31,990), GWM Ora 5 ($33,990), Leapmotor B05 ($35,990), GWM Ora ($35,990), Honda Super-ONE ($36,900), Jaecoo J5 EV ($36,990), Chery E5 ($37,990), Leapmotor B10 ($38,990), Forthing Taikon 5 ($39,000), Hyundai Inster ($39,600), Xpeng L03 ($41,900), BYD Atto 3 ($41,990), Geely EX5 ($41,990), MG S5 EV ($41,990), GAC Aion V ($42,590), Hyundai Kona Electric ($45,990), BYD Seal ($46,990), Skoda Elroq ($47,990), and more on our cheapest EVs to own list.
Before you sign
This is general information, not financial or tax advice. Talk to your employer's salary packaging provider or a licensed adviser about your own situation. The ATO's electric car exemption page has the official rules.
Common questions
Are electric cars exempt from FBT?
Yes. Battery electric cars priced under the fuel-efficient luxury car tax threshold are exempt from fringe benefits tax when provided through an employer, including by novated lease. A phase-down from 1 April 2027 has been proposed but is not yet law.
How much can you save with an EV novated lease?
It depends on your tax rate and the car. As a rough example, someone on $100,000 paying $14,000 a year of lease and running costs pre-tax saves about $4,480 a year in income tax, plus the GST saved on the purchase price.
Do plug-in hybrids still get the FBT exemption?
Not for new arrangements. Plug-in hybrids lost the exemption from 1 April 2025, although leases that were already in place before then can keep it.
When does the EV FBT exemption end?
Under the May 2026 budget proposal, the full exemption continues until 31 March 2027. From April 2027 it's limited to EVs up to $75,000 (with a 25% discount above that), and from April 2029 new leases get a 25% discount instead.
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How we work it out, and our sources
Weekly cost = the car's energy use × 250 km × your electricity or fuel price, with 90% of charging at home. Prices are list prices at October 2026; check with the dealer.
- Electricity: 2026–27 default rates (AER, Victorian Default Offer, state retailers). Public charging: Sydney network prices, July 2026.
- Petrol and diesel: ACCC capital-city averages, 21 October 2026.
- Cars: maker figures via CarExpert, Drive, CarsGuide and EV Central. Plug-in electric range is taken as 80% of the claim.
- Servicing: published capped prices; marked as an estimate where not yet published (CarExpert comparison).
- Tyres: an EV set lasts about 35,000 km, a petrol or hybrid set 50,000 km (RACV); prices from Gridly.
- Home charger: about $2,000 installed ($1,000–$3,000). Novated leases: PwC summary.
Printed from EV Pick · evpick.com.au. Prices and costs are estimates; check with the dealer. © 2026 EV Pick (T. Crouch). For personal use only; not to be copied, republished or sold without permission.