Why get a novated lease for an electric car?
Financing an electric vehicle through a novated lease can mean massive tax savings that make it considerably cheaper than a non-EV with a similar purchase price. This is mainly due to the fringe benefits tax (FBT) exemption for eligible EVs through a novated lease.
That’s on top of the standard income tax and GST savings available with salary packaging a car.
As a result, an EV novated lease can be much more cost-effective than using a car loan or paying cash for the same vehicle.
EV novated lease benefits
Pay your lease entirely from pre-tax income
100% of your novated lease payments can be made from your pre-tax salary with an eligible EV. This means you can reduce your taxable income while avoiding fringe benefits tax (FBT).
Save on the upfront cost of your EV with GST exemptions
Eligible electric vehicles get a GST discount on the purchase price, which can reduce the cost by up to $6,334 (2025-26 FY). This saving is built into your novated lease, lowering your repayments from day one.
Include running costs to maximise your tax savings
A novated lease lets you package everyday car expenses like electricity, servicing, insurance and tyres. Paying these costs from your pre-tax salary delivers ongoing tax savings throughout the lease term.
Claim back home and public charging costs with ease
If you pay for charging out of pocket, most lease providers allow you to claim these costs back. Reimbursements are typically handled through your lease account, making the process simple and trackable.
How does an electric car novated lease work?
An EV novated lease allows you to pay for an electric vehicle and its running costs directly from your salary before tax is deducted.
When you enter a novated lease agreement with your employer and a lease company, here’s what typically happens:
- Through a novated lease company you get your choice of new or used EV with unlimited mileage for personal use.
- Your employer deducts the lease payments from your pre-tax salary each pay cycle.
- Car running costs can be included as part of the lease agreement, which is based on your estimated annual kilometres driven.
- Novated lease terms range from one to five 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 new term.
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).
- Vehicles must be valued below the luxury car tax threshold (91,387 for FY 2025-26).
- FBT normally applies 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, 100% of the lease payment is made using your pre-tax salary. This makes novated lease deals on electric cars particularly appealing.
EV vs non-EV novated lease cost comparison
Vehicle driveaway price | |
EV novated lease | $54,900 (BYD SEALION 7 Premium) |
Non-EV novated lease | $45,160 (Mitsubishi Outlander ES 5 Seat) |
GST saving on purchase price | |
EV novated lease | $4,991 |
Non-EV novated lease | $4,105 |
Monthly cost (finance and/or running costs) | |
EV novated lease | $864 |
Non-EV novated lease | $1,048 |
Cost over 5 years | |
EV novated lease | $51,940 |
Non-EV novated lease | $62,880 |
Residual payment | |
EV novated lease | $15,433 |
Non-EV novated lease | $12,704 |
Total cost to own car and run for 5 years | |
EV novated lease | $67,373 |
Non-EV novated lease | $75,584 |
Cost difference | |
EV novated lease | $8,211 |
Non-EV novated lease | |
Total tax saving over 5 years | |
EV novated lease | $37,042 |
Non-EV novated lease | $17,777 |
| EV novated lease | Non-EV novated lease | |
|---|---|---|
Vehicle driveaway price | $54,900 (BYD SEALION 7 Premium) | $45,160 (Mitsubishi Outlander ES 5 Seat) |
GST saving on purchase price | $4,991 | $4,105 |
Monthly cost (finance and/or running costs) | $864 | $1,048 |
Cost over 5 years | $51,940 | $62,880 |
Residual payment | $15,433 | $12,704 |
Total cost to own car and run for 5 years | $67,373 | $75,584 |
Cost difference | $8,211 | |
Total tax saving over 5 years | $37,042 | $17,777 |
The incentive is already having a noticeable impact. According to the Electric Vehicle Council, EVs now make up 12.1% of all new car sales in Australia, up from 9.61% in 2024.
The government has announced it will review the FBT exemption by mid-2027 to assess electric car uptake. While plug-in hybrid vehicles (PHEVs) were initially included, they are no longer considered zero or low-emission vehicles for FBT purposes.
Which vehicles are eligible for the EV FBT exemption?
EV models eligible for FBT exemption
Here’s a list of the electric vehicles eligible for the FBT exemption based on their purchase price.
Abarth
- Abarth 500e Turismo
BMW
- BMW iX1 xDrive20
- BMW iX1 xDrive30
- BMW iX2 xDrive20
- BMW iX2 xDrive30
- BMW iX3 M Sport
- BMW i4 eDrive35
BYD
- BYD Atto 3 Essential
- BYD Atto 3 Premium
- BYD Dolphin Dynamic
- BYD Dolphin Premium
- BYD Seal Dynamic
- BYD Seal Premium
- BYD Seal Performance
- BYD Sealion 7 Premium
- BYD Sealion 7 Performance
Cupra
- Cupra Born
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 EV5 Air
- Kia EV5 Earth
- Kia EV5 GT Line
- Kia EV3 GT-Line
- Kia EV3 Air
Lexus
- Lexus UX 300e Luxury
- Lexus UX 300e Sports Luxury
Mazda
- Mazda MX-30 E35 Astina
Mercedes
- Mercedes-Benz EQA 250+
- Mercedes-Benz EQB 250+
MG
- 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
Nissan
- Nissan Leaf
- Nissan Leaf E+
Peugeot
- Peugeot e308
Polestar
- Polestar 2 Standard Range
- Polestar 2 Long Range Dual Motor
- Polestar 2 Long Range Single Motor
- Polestar 2 Long Range Performance
- Polestar 4 Long Range Single Motor
- Polestar 4 Long Range Dual Motor
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
Volkswagen
- Volkswagen ID.4
- Volkswagen ID.5
- Volkswagen ID Buzz
Volvo
- Volvo C40 Recharge
- Volvo EX30 Extended Plus
- Volvo EX30 Extended Ultra
- Volvo EX30 Performance Ultra
- Volvo EX40
Xpeng
- Xpeng G6 Standard
- Xpeng G6 Long Range
Zeekr
- Zeekr X
Based on estimated driveaway price as at December 2025. 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 packaged 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 and maintenance
- Replacement 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.
Some interesting developments…
Another potentially contentious running cost for electric vehicle owners is the introduction of a road user charge.
In New South Wales, the government has legislated a distance-based road user charge that is expected to begin from 1 July 2027 or when EVs make up 30% of new vehicle sales, whichever comes first. Under the proposed plan, the charge would be about 2.97 c per kilometre for battery EVs and 2.37 c per kilometre for plug-in hybrids, with rates indexed to inflation each year. Critics argue such a fee could deter some motorists from buying an EV, especially if it is perceived as adding to overall ownership costs.
It is unclear at this stage how the additional cost would be treated under a novated lease arrangement.
Other electric vehicle incentives in Australia
Below is a list of the current EV incentives by state:
- NSW: No additional incentives currently available.
- VIC: Up to $100 discount on registration for zero and low emission vehicles (ZLEVs). Reduced motor vehicle duty rates for EVs priced above $76,950 (when compared to equivalently-priced petrol and diesel vehicles).
- QLD: Discounted vehicle registration duty of $2 per $100 up to a value of $100,000 for EVs, compared to $3 per $100 for 1-4 cylinder vehicles. Cheaper vehicle registration fees at $293.20 as of 1 October 2025.
- WA: No additional incentives currently available.
- SA: No additional incentives currently available.
- ACT: Discounted registration for zero and low-emissions vehicles. Lower motor vehicle duty for ZEVs. Up to $15,000 low-interest loans to buy a ZEV under the Sustainable Household Scheme (eligible households only).
- TAS: Interest-free loans up to $10,000 to install charging infrastructure for households, businesses and non-profit organisations as part of the Energy Saver Loan Scheme.
- NT: Free registration for new and used plug-in electric vehicles (PEVs) and a stamp duty concession of up to $1,500 for vehicles under $50,000 (ends 30 June 2027). $1,000 for residential properties and $2,500 for businesses to buy and install a charger under the Electric Vehicle Charger Grants Scheme (applications close on 31 December 2025).
Important: Terms, conditions, limits and exclusions apply to these incentives. For the most up-to-date details, check with your state or territory government, or speak with a novated lease provider.
Car manufacturer origin shapes Aussie EV buying decisions
We asked over 1,000 car owners whether they’d consider buying an electric vehicle if they were in the market over the next five years.
Just over half (52.2%) said they’d go for an EV or hybrid, while 44.8% would stick with a petrol or diesel car. Around 3% said they already drive an EV or hybrid.
Our latest survey reveals something EV drivers have known for a while: brand origin matters. More than half of Aussie motorists (54%) say a car manufacturer’s country of origin carries more weight when choosing an EV or hybrid than when buying a petrol or diesel model, while the remaining 46% see it as equally important across both.
Digging into the generations, Baby Boomers and Millennials were the most likely to prioritise where their EV comes from (57% each), with Gen Z not far behind at 53%. Gen X were the least likely to draw a distinction, with 47% saying origin matters more for electric than for ICE vehicles.
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