Why get a novated lease for an electric car?
Paying for an eligible electric vehicle through a novated lease can mean massive tax savings. This is mainly due to the fringe benefits tax (FBT) exemption for eligible EVs and PHEVs through a novated lease.
That’s on top of the standard income tax and GST savings available with a novated lease.
However, the additional tax incentive on EV novated leases can make driving an EV considerably cheaper than a non-EV with a similar purchase price.
It also makes a novated lease on an EV considerably cheaper than financing the same eligible vehicle with a car loan, or even paying for it outright with cash.
EV novated lease benefits
100% of your lease payments can be made with pre-tax salary (no FBT)
GST saving on the vehicle purchase price (up to $6,334) PLUS running costs
Package all your car running costs to save more in tax
It's easy to claim back out-of-pocket charging costs through the lease provider
EV novated lease pricing (car & all running costs included)
Tesla Model Y
from $212/week
Overall tax saving $39,390
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Tesla Model 3
from $209/week
Overall tax saving $38,865
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BYD Atto 3
from $174/week
Overall tax saving $32,126
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Polestar 2
from $220/week
Overall tax saving $41,116
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Volvo C40
from $268/week
Overall tax saving $49,293
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Kia EV6
from $252/week
Overall tax saving $46,708
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Hyundai Ioniq 5
from $241/week
Overall tax saving $44,935
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Pricing assumes a driver in NSW, with annual pre-tax salary of $100,000, driving 15,000km per year over a five-year lease. Running costs include electricity, comprehensive car insurance, registration and CTP, servicing and tyres. Pricing is for base model.
How does an electric car novated lease work?
An EV novated lease allows you to pay for an electric vehicle and virtual running costs directly from your salary before tax is deducted.
You’ll enter a novated lease agreement with your employer and a lease company. Here’s what happens:
- The lease company provides the vehicle to you and you can use it entirely for personal use.
- Your employer deducts the lease payments from your pre-tax salary each pay cycle (this is known as salary sacrificing a car).
- Car running costs can be included as part of the lease budget (based on your estimated annual kms driven).
- Novated lease terms range from 1-5 years with fixed payments for the life of the lease.
- At the end of the novated lease term, you’ll have the option to pay the residual value of the car to own it outright (then trade it in and lease a new car if you wish), or you can extend the lease for a
EV novated lease FBT exemption explained
The FBT exemption on eligible models reduces the cost of an electric vehicle novated lease by thousands of dollars per year. Here are some key details to know:
- The exemption was introduced in late 2022 by the Australian Federal Government and means there is $0 payable in FBT on eligible electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs) -To be eligible, vehicles must be valued below the luxury car tax threshold ($91,387 for FY 2024/25).
- FBT normally does apply to a novated lease (and most other benefits provided by employers to employees).
- If FBT is payable, the novated lease is usually set up to include after-tax contributions to offset the FBT amount. This reduces the income tax savings and is one of the potential disadvantages of a novated lease.
- But with an eligible EV or PHEV, 100% of the lease payment is made using your pre-tax salary. This makes novated lease deals on electric vehicles particularly appealing at the moment.
The incentive has made a significant difference already. In 2022, electric vehicles (EVs and PHEVs) accounted for 3.8% of new vehicle sales in Australia, before increasing to 8.8% in 2023 and 9.3% for the first three quarters of 2024.
The government has said it will complete a review into this exemption by mid-2027 “to consider electric car take-up”.
PHEV exemption expires on 1 April 2025
The FBT exemption on PHEVs will stop on 1 April 2025, and from that point on only zero-emission (fully electric) vehicles will be eligible.
However, the ATO has clarified that if you commenced a novated lease before that date, the exemption will still apply to the existing agreement beyond the exemption deadline.
FBT will apply to any new leases or lease extensions (refinances) on PHEVs that started after 1 April 2025. FBT may also apply if an existing lease is amended after that date.
Which vehicles are eligible for the electric vehicle FBT exemption?
EV models eligible for FBT exemption
Which vehicles are eligible for the electric vehicle FBT exemption?
Here’s a list of the electric vehicles eligible for the FBT exemption based on their purchase price. (Plug-in hybrid vehicles are also exempt from FBT if purchased before 1 April 2025)
List of EVs and PHEVs eligible for $0 FBT through a novated lease
Abarth
- Abarth 500e Turismo
Alfa Romeo
- Alfa Romeo Tonale PHEV
AUDI
- AUDI Q4 e-TRON
BMW
- BMW iX1 xDrive20
- BMW iX1 xDrive30
- BMW iX3 M Sport
- BMW i4 eDrive35
BYD
- BYD Atto 3 Standard
- BYD Atto 3 Extended
- BYD Dolphin Dynamic
- BYD Dolphin Premium
- BYD Seal Dynamic
- BYD Seal Premium
- BYD Seal Performance
- BYD Sealion 6
- BYD Shark
Cupra
- Cupra Born
- Cupra Leon
- Cupra Formentor
Ford
- Ford Mustang Mach-E Select
Fiat
- Fiat 500e
GWM
- GWM Ora
Hyundai
- Hyundai Kona Elite Standard Range
- Hyundai Kona Elite Long Range
- Hyundai Kona Highlander Standard Range
- Hyundai Kona Highlander Long Range
- Hyundai Ioniq 5 Dynamiq
- Hyundai Ioniq 5 Techniq
- Hyundai Ioniq 5 Epiq
- Hyundai Ioniq 6 Dynamiq
- Hyundai Ioniq 6 Techniq
- Hyundai Ioniq 6 Epiq
Kia
- Kia Niro S
- Kia Niro GT-Line
- Kia Niro Plus S
- Kia EV6 Air
- Kia EV6 GT-Line RWD
- Kia EV6 GT-Line AWD
- Kia Sorento GT-Line PHEV
- Kia EV5 Air
- Kia EV5 Earth
- Kia EV5 GT Line
Lexus
- Lexus UX 300e Luxury
- Lexus UX 300e Sports Luxury
- Lexus RZ450e Luxury
- Lexus RZ450e Sports Luxury
- Lexus RZ450e Sports Luxury Two-Tone
Mazda
- Mazda MX-30 E35 Astina
- Mazda CX-60 P50e Evolve
- Mazda CX-60 P50e GT
Mercedes
- Mercedes-Benz EQA 250
MG
- MG HS+ Excite
- MG HS+ Essence
- MG ZS EV Excite
- MG ZS EV Essence
- MG4 Excite 51
- MG4 Excite 64
- MG4 Essence 64
- MG4 Long Range
Mini
- Mini Hatch SE Classic
- Mini Hatch SE Yours
- Mini Countryman SE Classic
- Mini Countryman SE Yours
Mitsubishi
- Mitsubishi Eclipse Cross PHEV ES
- Mitsubishi Eclipse Cross PHEV Aspire
- Mitsubishi Eclipse Cross PHEV Exceed
- Mitsubishi Outlander PHEV ES
- Mitsubishi Outlander PHEV Aspire
- Mitsubishi Outlander PHEV Exceed
- Mitsubishi Outlander PHEV Exceed Tourer
Nissan
- Nissan Leaf
- Nissan Leaf E+
Peugeot
- Peugeot e208
- Peugeot e2008
- Peugeot 308 GT- Sport PHEV
- Peugeot 3008 GT PHEV
- Peugeot 408 PHEV
- Peugeot 408 GT PHEV
- Peugeot 508 GT PHEV
Polestar
- Polestar 2 Standard Range
- Polestar 2 Long Range Single Motor
- Polestar 2 Long Range Performance
- Polestar 4
Renault
- Renault Megane E-Tech
SKODA
- SKODA Enyaq Sportline
- SKODA Enyaq RS
SMART
- SMART 1 Pro +
- SMART 1 Premium
- SMART 1 BRABUS
- SMART 3 Pro +
- SMART Premium
- SMART BRABUS
Tesla
- Tesla Model 3 RWD
- Tesla Model 3 Long Range
- Tesla Model 3 Performance
- Tesla Model Y RWD
- Tesla Model Y Long Range
Toyota
- Toyota bZ4X 2WD
- Toyota bZ4X AWD
- Toyota bZ4X AWD - Two Tone Roof
Volvo
- Volvo C40 Recharge
- Volvo EX30 Extended Plus
- Volvo EX30 Extended Ultra
- Volvo EX30 Performance Ultra
Xpeng
- Xpeng G6 Standard
- Xpeng G6 Long Range
Based on estimated driveaway price as at November 2024. Please check current pricing and vehicle delivery times with the manufacturer or your novated lease provider.
What EV running costs can I include in my novated lease?
EV novated leases can be set up to include vehicle running costs in the regular lease payment. This means you maximise your tax savings and have the convenience of one payment for almost all of your car expenses.
With an EV novated lease, there is the extra advantage of the FBT exemption applying to your packages running costs too.
Running costs you can include (FBT-free):
- Charging costs (electricity)
- Registration, CTP insurance and road user charges (RUC)
- Comprehensive car insurance
- Roadside assistance
- Servicing
- Tyres
- Car washes
Most novated lease companies give flexibility for you to choose your provider for these costs (e.g. you can do your own car insurance comparison), but there may be a fee in some cases if you don't go with the lease provider's default insurance.
How to claim charging costs on an EV novated lease
EV drivers can claim back charging expenses through their novated lease in one of two ways, according to a draft guideline from the ATO:
- Actual cost method Drivers can claim based on the actual cost of charging (using a home charger or commercial charger) by keeping a record of all charging costs incurred and submitting receipts to your novated lease provider for reimbursement from your budget.
- Shortcut method Alternatively you can claim back a flat rate of 4.2c per kilometre travelled to cover charging costs. This method can only be used for zero-emission EVs (not PHEVs). If you use the shortcut method, you can’t separately claim for commercial charging costs. The 4.2c/k rate must apply for all charging.
What EV costs are not exempt from FBT?
Bear in mind some related costs cannot be included, such as the cost of installing a battery or fast charger in your home. A replacement battery for the car itself will also not be exempt if it significantly improves the performance of the car.
Overall the FBT exemption is going a long way to removing one of the main barriers to people owning an EV in Australia.
But there are several other common misconceptions about electric vehicles in Australia, and indeed about novated leases. Here’s what you need to know about some of the myths you may have heard:
Common electric vehicle & novated lease misconceptions
"EVs are too expensive”
Based on purchase price alone, EVs are still generally more expensive than equivalent petrol and diesel cars.
BUT, if you factor in the tax and other government incentives available, plus the much lower fuel costs, in many instances it will work out significantly cheaper overall to drive an EV, particularly when you compare novated lease costs versus car loans.
What's more, as usage grows, the stock of more affordable used EVs available to buy will become larger. You can also pay for a used car with a novated lease.
“Wait times on electric vehicles are much longer”
The supply of electric vehicles to Australia has improved considerably.
The reality is delivery times for new vehicles vary more based on the manufacturer and model of car than whether the vehicle is electric or not.
“Novated leases are only for very high income earners”
It’s true that people on higher incomes save more with a novated lease, because they will be in a higher income tax bracket and paying a higher marginal rate of tax. However, if you are paying income tax at all, you can save with a novated lease.
Plus, one of the primary tax savings – the GST discount on the purchase price of your vehicle – will be exactly the same regardless of what your income is.
Novated leases are very flexible and can be tailored to most people who are eligible through their employer, including people who have a bad credit history.
“The residual payment will make it more expensive”
The residual payment on a novated lease represents an estimate of the value of the car at the end of the novated lease term. In many cases, the actual value of the vehicle will be higher than the residual amount. If that’s the case you can trade in the car, pay off the residual, and keep the difference as tax-free profit.
"I can't get an EV because charging it will be too difficult"
Owning an EV can certainly be more logistically challenging if you live in an apartment or don't have off-street parking. But charging an EV is much simpler than a lot of people think.
You don't need a home battery or sophisticated charging system. Access to a standard electrical socket is really all that's needed. There is also free charging available in many public spaces (like supermarket car parks), plus a network of public fast-chargers you can pay to use.
Other electric vehicle incentives in Australia (state-by-state)
Victoria
- Zero and low emission vehicles (ZLEVs) are eligible for a registration discount. Discounted motor vehicle duty rates apply to high-value low-emission (120gm/km) passenger vehicles compared to equivalently-priced petrol and diesel vehicles (priced above $71,849).
Queensland
- Discounted vehicle registration duty: $2 per $100 up to a value of $100,000 for battery EVs, compared to $4 per $100 for 4-cylinder vehicles.
- Discounted vehicle registration fees: $283.50 per year (excluding compulsory third-party insurance and traffic improvement fee) for battery EVs, compared to $360.60 per year for 4-cylinder vehicles.
WA
- WA's rebate scheme offers $3,500 on new EV purchases with a dutiable value of $70,000 or less. To be eligible, the vehicle must be powered solely by batteries or hydrogen fuel cells that do not emit greenhouse gases. Hybrid vehicles are not eligible for a rebate. Applications for the rebate will be accepted until midnight, Saturday 10 May 2025.
South Australia
- A 3-year registration fee exemption is available on any eligible new electric vehicles valued below $68,750 and first registered between 28 October 2021 and 30 June 2025.
- Drivers of eligible vehicles acquired through a lease can take advantage as long as the vehicle is registered in the name of the individual or the business entering into the leasing arrangement. A copy of the lease agreement needs to be provided as part of the application process.
Northern Territory
- From 1 July 2022 to 30 June 2027, the NT Government will waive stamp duty fees for the sale of plug-in EVs up to $50,000 - providing a saving of up to $1,500, and the registration fee when you register your EV - providing an annual $91 saving. If you own an electric vehicle (EV), you can also apply for funding of up to $1,000 to buy and install a charger at your residential property, or up to $2,500 for a business.
Australian Capital Territory
- No stamp duty payable on new vehicles that emit up to 130g of CO2 per kilometre (km). The following vehicle types may be eligible for reduced registration fees: zero-emission vehicles (ZEVs); plug-in hybrid vehicles (PHEVs; hybrid electric vehicles (HEVs ; low-emission petrol and diesel vehicles.
Tasmania
- No-interest loans to install charging infrastructure for electric vehicles are available for households, small businesses and non-profit organisations. Loans are offered as part of the Energy Saver Loan Scheme, which provides interest‑free loans of between $500 and $10,000, over three years, for energy efficient products.
Important: Terms, conditions, limits and exclusions apply to these incentives. Check with your local state or territory government for details.
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