Novated leasing an EV in Australia: the FBT exemption, the April 2027 changes and red flags

This guide explains novated leasing for an EV in Australia in plain English: how the FBT exemption works, exactly what’s proposed from April 2027, the side effects most quotes don’t mention, and the red flags to check before you sign. It’s general information, not financial or tax advice.

How does a novated lease work?

A novated lease is a three-way agreement between you, your employer and a finance company. Your employer pays the lease and the car’s running costs (such as charging, servicing, tyres, registration and insurance) from your salary before tax, so your taxable income falls (Moneysmart). You choose the car, and it can be used privately.

• Income tax: every dollar packaged before tax saves your marginal tax rate plus the 2% Medicare levy. In 2026–27, income from $45,001 to $135,000 is taxed at 30% (ATO). So if $12,000 a year of lease and running costs comes out of pre-tax pay, someone in that bracket pays about $3,840 less income tax and Medicare levy.
• GST: the finance company or employer can usually claim the GST on the car’s price and running costs, up to a limit. For 2026–27 the most GST credit that can be claimed on a car is $6,353, which is one-eleventh of the $69,883 car limit (ATO).
• The residual (balloon): at the end you pay a lump sum to keep the car, refinance it or trade it in. The ATO sets minimum residuals for an 8-year life car of 65.63% after one year, 56.25% after two, 46.88% after three, 37.50% after four and 28.13% after five (ATO TD 93/142). The residual isn’t paid from pre-tax salary, and GST applies to it (Canstar).

Moneysmart notes salary packaging usually suits middle to high incomes, because the saving depends on your tax rate (Moneysmart).

What is the FBT exemption for electric cars?

Normally, a car provided through your employer attracts FBT, which on a novated lease is often offset by paying part of the cost from after-tax salary. For eligible EVs, there’s no FBT at all. The ATO lists four conditions (ATO):

1. The car is a zero or low emissions vehicle: a battery electric or hydrogen fuel cell car. Plug-in hybrids have been excluded since 1 April 2025, apart from some existing arrangements.
2. It was first held and used on or after 1 July 2022 (this matters for used EVs).
3. It’s used by a current employee or their family.
4. Luxury car tax has never been payable on its import or sale. For 2026–27, the threshold for fuel-efficient cars is $91,661 (ATO).

Registration, insurance, repairs and maintenance, and the electricity to charge the car are also exempt. A home charger isn’t: it may be a taxable fringe benefit if your employer pays for it (ATO). For the FBT year that started on 1 April 2026, the ATO’s shortcut home charging rate is 5.47 cents per km (ATO). Check what a charger really costs in our home EV charger installation cost guide.

What happens to the EV FBT exemption in April 2027?

On 5 May 2026 the Government announced the exemption will narrow in three phases (Treasury ministers, ATO):

Announced, not yet law. Treasury released draft legislation for consultation from 10 to 28 September 2026 (Treasury). Checked 19 Oct 2026.

Existing leases won’t be affected, the Government says. The draft’s explanatory materials suggest protection lasts while the original commitment continues, but a new commitment may arise, and the protection may end, if the car is refinanced, the lease term or residual is changed, accessories are added that change the payments, or you change employer (Deloitte). Until the law passes, these details could change.

What “$75,000” means: the draft uses the car’s FBT base value, which is broadly the cost price including GST, dealer delivery and fitted non-business accessories, but not registration or stamp duty (ATO). That’s close to a list price before on-road costs, but accessories count. Of the 297 EV variants on our EV prices page, 178 start at or below $75,000 and 43 sit between $75,000 and the $91,661 threshold, based on advertised prices. Find options in our cheapest EVs guide and the compare tool.

If your EV costs more than $75,000, the timing of your commitment could matter, because a lease committed to before 1 April 2027 keeps the current exemption. Don’t rush into a car you don’t need. Ask your provider to confirm in writing how they treat the commitment date, and remember the final law may differ from the draft.

The catch most quotes skip: reportable fringe benefits

An exempt EV is still a reportable fringe benefit. Your employer works out what the benefit would have been worth and shows a grossed-up amount on your income statement. You don’t pay income tax on it, but it counts towards the Medicare levy surcharge, private health insurance rebate, HELP and other study loan repayments, family assistance payments, child support and several super concessions (ATO).

Example: under the statutory formula, the taxable value is 20% of the car’s base value a year, less any after-tax contributions (ATO). For a car with a $45,000 base value used all year, that’s $9,000. Reportable amounts are grossed up by 1.8868 (ATO), so about $16,981 would appear on your income statement. If you have a HELP debt or get family payments, factor that in.

Is a novated lease worth it for an EV?

It often is for an employee on a middle or higher income who would buy a new EV anyway and plans to stay with their employer for the lease term. It’s less attractive if:

• you’re on a low income, where the tax saving is small;
• you may change jobs soon. If you leave, you still owe the lease. It’s usually converted to a standard loan without the tax benefits unless your new employer takes it on (Canstar);
• the reportable fringe benefit hurts your HELP repayments, family payments or child support;
• you would pay cash or get a cheap car loan and keep the car for many years. Compare the total cost over the term, including the residual, against a simple loan.

Running costs are packaged too, so a cheap-to-run EV helps. Our EV charging cost guide and running-cost calculator show what charging really costs, which helps you spot a padded budget. State concessions are in our state EV incentive finder.

Novated lease red flags: what to check in a quote

• No interest rate, or a flat rate. In a study of 1,753 novated lease quotes from 53 providers, the lender millarX reported that 68.2% showed no interest rate and 92.5% of those that did understated the real cost (millarX). Ask for the finance payment, residual, total amount financed and total cost, and compare the whole cost.
• A car price above the deal you can get yourself. Get your own written drive-away quote from a dealer and compare it with the price in the lease. Some brand offers can’t be combined with novated lease discounts.
• Padded or vague running-cost budgets. Charging an EV at home is cheap, and unspent budget may only be refunded at the end, or not at all. Ask how the budget is set and how leftovers are returned.
• Fees. Check for establishment, monthly management, early termination and end-of-lease fees, and whether any are rolled into the finance.
• Bundled insurance and extras. Paint protection, tinting and accessories can change the base value and the payments. Get separate prices and say no to what you don’t want.
• Pressure to sign before a deadline. The April 2027 changes don’t affect EVs costing $75,000 or less until at least April 2029, under the announced rules.
• Used EVs: check the car was first used after 1 July 2022 and luxury car tax was never payable on it, or the exemption won’t apply (ATO).