Novated Lease on an EV in Australia: The Complete 2026 Guide

The FBT exemption for electric vehicles has made novated leasing the most tax-effective way to buy an EV in Australia. If your employer offers salary packaging, a novated lease on an eligible battery electric vehicle lets you pay for the car and all running costs from pre-tax salary — with zero fringe benefits tax.

This guide covers the practical mechanics: which cars qualify, how much you actually save, how to bundle an EV charger into the lease, which providers to use, and the traps that the marketing materials don’t mention.

For a direct cost comparison between novated lease and car loan, see our novated lease vs car loan analysis. To model your own numbers, use our novated lease calculator.

How the FBT exemption works

Under the Treasury Laws Amendment (Electric Car Discount) Act 2022, battery electric vehicles and hydrogen fuel cell vehicles are fully exempt from fringe benefits tax when provided through a salary packaging arrangement — as long as the vehicle’s value is below the luxury car tax threshold for fuel-efficient vehicles.

Without this exemption, a novated lease on a $55,000 car would generate roughly $5,170 per year in FBT (calculated as 20% statutory fraction × 47% FBT rate × $55,000). Over a 3-year lease, that is $15,510 in tax that would either be paid by your employer (and passed to you as reduced salary packaging) or offset through post-tax Employee Contribution Method payments.

With the exemption, that liability is zero. The entire lease payment and running costs come from pre-tax salary with no FBT offset. This is the mechanism that makes EV novated leasing dramatically cheaper than buying outright.

Key rules:

• The vehicle must be a battery electric vehicle (BEV) or hydrogen fuel cell vehicle (FCEV)
• The vehicle’s first retail price must be below the luxury car tax threshold for fuel-efficient vehicles — $91,387 for FY 2025-26
• The vehicle must not have been held or used before 1 July 2022
• The exemption has no legislated sunset date, though the government committed to reviewing it by mid-2027

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Which EVs qualify

Every mainstream EV sold in Australia under ~$90,000 drive-away qualifies. Here are the most popular novated lease choices:

Model	Approx. drive-away	Eligible?
BYD Dolphin	$38,000–$42,000	Yes
MG4	$34,000–$40,000	Yes
BYD Atto 3	$45,000–$49,000	Yes
BYD Seal	$50,000–$55,000	Yes
Tesla Model 3 RWD	$54,000–$57,000	Yes
Tesla Model Y RWD	$57,000–$61,000	Yes
Hyundai Ioniq 5	$60,000–$65,000	Yes
Kia EV6	$62,000–$67,000	Yes
Volvo EX30	$55,000–$60,000	Yes
Polestar 2	$60,000–$68,000	Yes

Models that typically exceed the threshold (not eligible for FBT exemption): Tesla Model S, Tesla Model X, BMW iX, BMW i7, Mercedes EQS, Porsche Taycan, Audi e-tron GT, Lotus Eletre.

Edge cases: The Tesla Model Y Performance and Kia EV6 GT approach the threshold when heavily optioned. Check the specific drive-away price before committing.

Prices are approximate and change frequently — verify current pricing with the manufacturer or your novated lease provider. The LCT threshold is indexed annually.

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What you can salary sacrifice

Under a novated lease with the FBT exemption, the following costs are deducted from your pre-tax salary:

Cost	Typical annual amount
Lease repayments (finance)	Depends on vehicle price and term
Registration	$300–$600
Comprehensive insurance	$1,200–$2,000
Servicing and maintenance	$200–$400
Tyres (amortised over lease)	$300–$500
Charging electricity	$500–$800
Roadside assistance	$100–$200
Home EV charger (hardware + install)	$1,300–$4,000 (one-off, spread over term)

Every dollar of these costs that comes from pre-tax salary saves you your marginal tax rate. At the 30% bracket ($45,001–$135,000 under Stage 3 tax rates), plus 2% Medicare levy, every $1,000 pre-tax costs you $680 in foregone take-home pay instead of $1,000 after tax.

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Bundling an EV charger into the lease

This is the most under-utilised benefit of an EV novated lease. All major providers now allow you to include a home EV charger — hardware and installation — in the lease package.

How it works

The charger cost is treated as a vehicle accessory. It is added to the total lease package and spread across the lease term in your regular pre-tax salary deductions. The lease company claims the GST on the charger, so you effectively pay the GST-exclusive price.

Provider caps

Provider	Charger bundling	Typical cap
Maxxia	Yes	$3,000–$5,000
SG Fleet	Yes	$3,000–$5,000
Autopia	Yes	$2,500–$3,500
SmartLeasing	Yes	$3,000–$5,000
RemServ	Yes	Similar to Maxxia

The exact cap often depends on your employer’s packaging agreement with the provider, not just the provider’s standard terms. Check with your employer’s salary packaging team.

What the saving looks like

A $3,000 charger installation bundled into a novated lease at the 32% effective rate (30% tax + 2% Medicare, for income $45,001–$135,000):

• After-tax effective cost: $3,000 × (1 − 0.32) = $2,040
• Plus GST saving (~$273): effective cost drops to approximately $1,770
• Saving vs paying out of pocket: ~$1,230

At the 39% effective rate ($135,001–$190,000), the same charger costs you ~$1,560 — saving $1,440.

What happens at lease end

The charger stays with you. It is permanently fixed to your property and is not returned to the lease company. The cost has been fully amortised over the lease term with no residual to settle.

Apartment installations

You can bundle an apartment charger installation into a novated lease in principle. The complication is cost: apartment installations with long cable runs can reach $5,000–$10,000+, easily exceeding provider caps. Anything above the cap comes out of your own pocket (post-tax).

You will also need strata approval before proceeding. See our strata EV charger approval guide for the process, and apartment EV charger grants for funding options that can offset the portion above your novated lease cap.

For help choosing the right charger, see our EV charger comparison tool.

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The PHEV exclusion

Plug-in hybrid electric vehicles lost FBT exemption eligibility for new arrangements from 1 April 2025. This was legislated in the original 2022 Act — not a surprise change.

What this means in practice:

• If you entered a PHEV novated lease before 1 April 2025, the FBT exemption continues for the life of that arrangement (grandfathered)
• If you enter a new PHEV novated lease after 1 April 2025, full FBT applies
• You can still novated lease a PHEV — but the financial case is much weaker with FBT liability eroding the pre-tax benefit
• Only BEVs and hydrogen FCEVs qualify for new FBT-exempt arrangements

Popular PHEVs that were commonly leased before the cutoff include the Mitsubishi Outlander PHEV, MG HS Plus EV, Volvo XC60 Recharge, and BMW X5 xDrive50e. There was a rush of PHEV novated leasing in Q1 2025 as buyers locked in arrangements before the deadline.

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Residual values and end-of-lease options

The ATO prescribes minimum residual values as a percentage of the vehicle’s original drive-away price:

Lease term	Minimum residual
1 year	65.63%
2 years	56.25%
3 years	46.88%
4 years	37.50%
5 years	28.13%

For a $55,000 EV on a 3-year lease, the minimum residual is $55,000 × 46.88% = $25,784. This is the balloon payment at lease end.

Your options at lease end

1. Pay the residual and own the car — most common choice. The residual is paid from after-tax money. If the car’s market value exceeds the residual, you’ve effectively bought it at a discount.

2. Re-lease the same car — enter a new novated lease on the same vehicle. The old residual becomes the new principal. A new (lower) residual is set. This extends the pre-tax benefits for another term.

3. Hand the car back — the lease company sells it. If the sale price exceeds the residual, you may receive the surplus. If it is less, you cover the shortfall. Read your contract carefully — not all providers offer this option cleanly.

4. Trade in and start a new lease — sell/trade the car, settle the residual, and begin a new novated lease on a different EV.

3-year terms are the most popular for EV novated leases: they sit well within battery warranty periods, the residual is manageable, and EV technology moves fast enough that upgrading every 3 years makes sense.

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The reportable fringe benefits trap

This is the gotcha that novated lease providers rarely mention upfront.

Even though the FBT exemption means no fringe benefits tax is payable, the value of the car benefit is still reported on your income statement as a Reportable Fringe Benefit (RFB). This RFB amount is added to your adjusted taxable income for the purpose of:

• HECS/HELP repayment thresholds — can push you into a higher repayment bracket
• Medicare Levy Surcharge — if you don’t hold private health insurance, the RFB could push your income above the $93,000 single/$186,000 family threshold
• Family Tax Benefit and other income-tested government payments
• Child support calculations

The RFB amount is typically calculated as the vehicle’s cost × 20% (statutory fraction) = the reportable amount per year. On a $55,000 EV, that is $11,000 added to your adjusted taxable income annually.

Example: An employee earning $85,000 with a $55,000 EV novated lease has an adjusted taxable income of $96,000 for HECS purposes ($85,000 + $11,000 RFB). If the HECS repayment rate jumps at $96,000 versus $85,000, that is a real cost.

This does not make a novated lease a bad deal — the tax savings typically far outweigh the RFB impact. But you should model it before signing, especially if you have a HECS debt, are close to a Medicare Levy Surcharge threshold, or receive income-tested benefits.

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Choosing a provider

Major novated lease providers in Australia

Provider	Notes
Maxxia	One of the two largest. Part of Eclipx Group. Strong employer partnerships, EV-specific packages.
SG Fleet	Merged with LeasePlan Australia. Major fleet and novated lease provider.
SmartLeasing	Online-focused, competitive pricing. Also part of Eclipx Group.
Autopia	EV-specialist, digital-first. Gained prominence post-FBT exemption.
RemServ	Queensland-based, strong in government and public sector.
Fleet Network	WA-based, expanding nationally.

What to compare

• Finance rate — ask for the comparison rate, not just the headline pre-tax payment. Rates vary from 6–9%.
• Management fees — monthly admin fees of $10–$30/month are standard. Some providers charge more.
• Charger bundling cap — if you want to include a home charger, confirm the cap under your employer’s agreement.
• End-of-lease flexibility — can you hand back the car, or are you locked into paying the residual?
• Re-novation fee — if you change jobs, what does it cost to transfer?

Your employer’s salary packaging provider is usually the path of least resistance, but you are not always locked into them. Some employers allow you to choose any provider. Ask.

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Who should not novated lease an EV

A novated lease is not the right choice if:

• Your employer does not offer salary packaging. No employer participation, no novated lease. Many small businesses and casual employers do not offer it.
• You earn under ~$45,000. At the 16% marginal rate (plus 2% Medicare), the pre-tax saving is modest and may not justify the complexity and fees.
• You plan to change jobs within 12 months. While leases can be transferred, the process adds friction and some providers charge re-novation fees. If your employment is unstable, the risk may not be worth it.
• The vehicle exceeds the LCT threshold. Above $91,387, the FBT exemption does not apply and the financial case changes dramatically. Run the numbers before assuming a novated lease still wins.
• You want outright ownership from day one. A novated lease means the finance company owns the car until you pay the residual. If that structure bothers you, a car loan or cash purchase is simpler.

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Step-by-step: how to set up an EV novated lease

1. Confirm your employer offers salary packaging — ask HR or your payroll team. They will tell you which provider(s) they work with.

2. Choose your EV — make sure the drive-away price is under the LCT threshold ($91,387 for FY 2025-26). Browse eligible models on our electric vehicles hub.

3. Get a novated lease quote — contact the provider directly or through your employer’s portal. The quote will show your pre-tax deduction, running cost budget, residual, and estimated take-home pay impact.

4. Decide on charger bundling — if you want a home charger included, tell the provider upfront. They will either arrange the installation through a preferred installer or reimburse you within the cap.

5. Review the RFB impact — check how the reportable fringe benefit affects your HECS repayments, Medicare Levy Surcharge, and any income-tested benefits. Your provider should model this for you.

6. Sign the lease and deed of novation — three-way agreement between you, your employer, and the finance company. Your employer begins deducting from your pre-tax salary.

7. Take delivery — the finance company purchases the vehicle. You collect it from the dealer.

8. At lease end — pay the residual to own the car, re-lease, or trade in and start a new lease.

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The bottom line

The EV FBT exemption has made novated leasing genuinely advantageous for any Australian employee earning above $45,000 with access to salary packaging. The savings are real — $12,000–$25,000 over a 3-year term depending on your income and vehicle price — and the ability to bundle a home charger into the lease adds further value.

The traps are the RFB reporting impact (model it before you sign), the residual obligation at lease end (have a plan for it), and the assumption that the exemption will last forever (it has no sunset date, but it is under review).

For the detailed cost comparison, see novated lease vs car loan for an EV. To model your own numbers, use our novated lease calculator. For choosing the right home charger to bundle, see our EV charger comparison tool.