How does an electric car novated lease work?

An EV novated lease allows you to pay for an electric vehicle and most running costs directly from your salary before tax is deducted. You’ll enter a novated lease agreement with your employer and a lease company who provides the vehicle to you and you can use it entirely for personal use. Your employer then deducts the lease payments from your pre-tax salary each pay cycle. 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 and at the end of the 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 renew the lease for a new term.

What is the EV novated lease FBT exemption?

The FBT exemption on eligible models reduces the cost of an electric vehicle novated lease by thousands of dollars per year. The exemption was introduced in late 2022 by the Federal Government and means there is $0 payable in FBT on eligible electric vehicles valued below the luxury car threshold ($84,916 for FY 2022/23). 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. But with an eligible EV, 100% of the novated lease payment is made using your pre-tax salary.

Electric Car Novated Lease - Is it better than paying cash?

EV novated lease benefits

GST saving on the vehicle (up to $6,334) PLUS running costs

100% of your lease payments are made pre-tax (with no FBT)

Package all your car running costs to save more in tax

Why get a novated lease for an electric car?

The cost of buying an EV has been a barrier in the past for many people. In fact, most Australians still believe electric vehicles are too expensive.

But things are changing.

Now, if you finance an electric vehicle through a novated lease, the tax savings can make an EV 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 and PHEVs financed through a novated lease.

EV novated lease pricing (car & all running costs included)

Tesla Model Y

from $209/week

Overall tax saving $36,599

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Tesla Model 3

from $197/week

Overall tax saving $34,556

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BYD Atto 3

from $158/week

Overall tax saving $27,870

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MG ZS EV

from $162/week

Overall tax saving $28,502

Volvo XC40 Recharge

from $221/week

Overall tax saving $38,939

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Polestar 2

from $191/week

Overall tax saving $33,549

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Volvo C40 Recharge

from $223/week

Overall tax saving $39,273

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Kia EV6

from $217/week

Overall tax saving $37,973

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Hyundai Ioniq 5

from $209/week

Overall tax saving $36,586

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Pricing assumes a driver in NSW, with annual pre-tax salary of $90,000, 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.

Novated lease explained with Money Matchmaker

An EV novated lease allows you to pay for an electric vehicle and most 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 car salary sacrificing).

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 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.

The exemption was introduced in late 2022 by the Federal Government and means there is $0 payable in FBT on eligible electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs) 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 drawbacks 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 massive difference already. For example, in June 2023, electric vehicles accounted for 8.8% of new vehicle sales in Australia, compared to 1.8% in the same month last year. In the period from January to July 2023, just under 50,000 news EVs were sold in Australia, compared to 33,410 EV sales in all of 2022.

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.

Tesla Model Y (RWD)	Novated lease	Car loan
Vehicle driveaway price	$68,301	$68,301
Up-front GST saving	$6,109	$0
Weekly cost (incl running costs)	$221	$370
Annual income tax saving	$6,084	$0
Novated lease residual	$19,243	n/a
Total cost over 5 years to own car	$77,007	$101,723
Difference	$24,716 savings	n/a

Important: This is a hypothetical example and costs will be different based on other examples. Calculation assumes a driver in NSW, driving 15,000km per year, with an annual salary of $120,000. Running costs include charging, comprehensive car insurance, registration and CTP, servicing and tyres. Car finance assumes an interest rate of 7.50% and weekly repayments. Estimated driveaway price as at August 2023.

EV models eligible for FBT exemption

Alfa Romeo

Alfa Romeo Tonale PHEV

BMW

BMW iX1 eDrive20

BMW iX1 eDrive30

BMW iX3 M Sport

BMW i4 eDrive35

BYD

BYD Atto 3 (Standard & Extended)

BYD Dolphin (Dynamic, Premium & Sport)

BYD Seal (Dynamic, Premium & Performance)

Cupra

Cupra Born

Cupra Leon

Cupra Formentor

Fiat

Fiat 500e

GWM

GWM Ora

Ford

Ford Escape ST-Line PHEV

Ford Mustang Mach‑E Select

Hyundai

Hyundai Ioniq 5 (Dynamiq, Techniq & Epiq)

Hyundai Ioniq 6 (Dynamiq & Techniq)

Hyundai Kona Elite (Standard & Long Range)

Hyundai Kona Highlander (Standard Range & Long Range)

Kia

Kia Niro (S, GT-Line, Plus S)

Kia EV6 (Air & GT-Line RWD/AWD)

Kia Sorento GT-Line PHEV

Lexus Lexus UX 300e (Luxury & Sports Luxury)

Mazda

Mazda MX-30 E35 Astina

Mazda CX-60 P50e (Evolve & GT)

Mercedes-Benz EQA A250

MG 4 (Excite, Essence & Long Range)

MG HS+ Excite & Essence

MG ZS EV (Excite, Essence & Long Range)

Mini

Mini Hatch SE (Classic & Yours)

Mini Countryman SE (Classic & Yours)

Mitsubishi

Mitsubishi Eclipse Cross PHEV (ES, Aspire & Exceed)

Mitsubishi Outlander PHEV (ES, Aspire, Exceed & Exceed Tourer)

Nissan

Nissan Leaf (including E+)

Peugeot

Peugeot e208 (coming in 2024)

Peugeot e2008

Peugeot 308 GT- Sport PHEV

Peugeot 3008 PHEV

Peugeot 408 PHEV (coming soon)

Peugeot 508 GT PHEV

Polestar

Polestar 2 (Standard Range, Long Range & Long Range Performance)

Renault

Renault Megane E-Tech

Tesla

Tesla Model 3 (RWD, Long Range & Performance)

Tesla Model Y (RWD & Long Range)

Volvo

Volvo C40 Recharge

Volvo XC40 (Recharge & Recharge Twin)

Volvo EX30 Extended Plus, Extended Ultra & Performance Ultra)

*Based on estimated vehicle pricing from manufacturers as at December 2023.

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:

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.

Using the shortcut method, meaning 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:

Car finance options & guides

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See how much you could save on your car and running costs with a novated lease. Get a personalised, no-obligation quote today.

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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 a lot in 2023. In fact, delivery times on EV brands like Tesla and BYD are among the fastest of any new vehicle you can buy currently.

The reality is delivery times for new vehicles vary more based on the manufacturer and model of car than whether 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 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.

State/territory	Incentive(s)	Max saving
NSW	Eligible new and used electric vehicles up to a value of $78,000 are exempt from stamp duty.	Up to $3,000
VIC	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).	Up to $100 per year for the registration discount. Motor vehicle duty saving will depend on the value of the EV.
QLD	A discounted vehicle registration rate applies. 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)	Rego saving depends on the vehicle. E.g. Currently a $74.50 annual saving on an EV versus a 4 cylinder petrol vehicle (both private passenger cars). Motor vehicle duty discount depends on the value of the vehicle but roughly works out at a 33% saving.
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. The rebate is being offered for 10,000 eligible vehicles licensed in WA, or for three years following the announcement (Saturday 10 May 2025), whichever comes first.	$3,500
SA	Eligible electric vehicle owners can claim the SA government’s $3,000 subsidy, plus the state's 3-year registration exemption. The SA government has made these incentives available for 7,000 new SA-registered battery electric and hydrogen fuel cell vehicles valued below $68,750 (including GST). Hybrid vehicles or used cars are not eligible. Drivers of eligible vehicles acquired through a lease can still 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.	$3,000 for the EV subsidy Currently the registration exemption means a $141 annual saving.
NT	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.	Up to $2,591 in the first year of owning an EV if you combine the three incentives.
ACT	No stamp duty payable on new vehicles that emit up to 130g of CO2 per kilometre (km). New or used zero emissions vehicles (ZEVs) purchased or acquired between 24 May 2021 and 30 June 2024 are eligible to receive two years of free registration.	Savings depend on the vehicle and its value. E.g. for a new EV with the top emission rating valued at $45,000, the stamp duty saving would be $1,350 versus an non-rated vehicle. Registration fee waiver may save drivers $329.40 per year.

State/territory

Incentive(s)

Max saving

NSW

Eligible new and used electric vehicles up to a value of $78,000 are exempt from stamp duty.

Up to $3,000

VIC

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).

Up to $100 per year for the registration discount.

Motor vehicle duty saving will depend on the value of the EV.

QLD

A discounted vehicle registration rate applies.

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)

Rego saving depends on the vehicle. E.g. Currently a $74.50 annual saving on an EV versus a 4 cylinder petrol vehicle (both private passenger cars).

Motor vehicle duty discount depends on the value of the vehicle but roughly works out at a 33% saving.

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. The rebate is being offered for 10,000 eligible vehicles licensed in WA, or for three years following the announcement (Saturday 10 May 2025), whichever comes first.

$3,500

Eligible electric vehicle owners can claim the SA government’s $3,000 subsidy, plus the state's 3-year registration exemption. The SA government has made these incentives available for 7,000 new SA-registered battery electric and hydrogen fuel cell vehicles valued below $68,750 (including GST). Hybrid vehicles or used cars are not eligible. Drivers of eligible vehicles acquired through a lease can still 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.

$3,000 for the EV subsidy

Currently the registration exemption means a $141 annual saving.

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.

Up to $2,591 in the first year of owning an EV if you combine the three incentives.

ACT

No stamp duty payable on new vehicles that emit up to 130g of CO2 per kilometre (km).

New or used zero emissions vehicles (ZEVs) purchased or acquired between 24 May 2021 and 30 June 2024 are eligible to receive two years of free registration.

Savings depend on the vehicle and its value. E.g. for a new EV with the top emission rating valued at $45,000, the stamp duty saving would be $1,350 versus an non-rated vehicle.

Registration fee waiver may save drivers $329.40 per year.

ELECTRIC VEHICLE NOVATED LEASE

EV novated lease benefits

EV novated lease pricing (car & all running costs included)

Tesla Model Y

from $209/week

Tesla Model 3

from $197/week

BYD Atto 3

from $158/week

MG ZS EV

from $162/week

Volvo XC40 Recharge

from $221/week

Polestar 2

from $191/week

Volvo C40 Recharge

from $223/week

Kia EV6

from $217/week

Hyundai Ioniq 5

from $209/week

How does an electric car novated lease work?

Novated lease electric car cost breakdown

Which vehicles are eligible for the electric vehicle FBT exemption?

What EV costs are not exempt from FBT?

Car finance options & guides

Common electric vehicle & novated lease misconceptions

Other electric vehicle incentives in Australia (state-by-state)