Novated leases for electric cars, explained
Updated 26 September 2026 · figures from the ATO and official sources
A novated lease is an agreement between you, your employer and a leasing company. Your employer pays for the car and its running costs from your salary, before tax.
Why electric cars save the most
Cars provided through salary packaging normally attract fringe benefits tax (FBT). Battery electric and hydrogen cars priced under the luxury car tax threshold for fuel-efficient cars ($91,661 in 2026–27) are exempt, as long as they were first used after 1 July 2022. With no FBT to cover, the whole cost can come from pre-tax pay.
Worked example: $55,000 car, $100,000 salary, 3-year lease
| Electric | Petrol or hybrid | |
|---|---|---|
| Pre-tax deductions a year | $16,408 | $6,408 |
| After-tax contribution a year | $0 | $11,000 |
| Cost to your take-home pay a year | $11,158 | $15,358 |
| Per fortnight | $429 | $591 |
| Balloon at the end | $23,440 | $23,440 |
Assumes 8% interest and $5,000 a year of running costs, and no fees. Real quotes differ, so use the novated lease calculator with your own numbers.
The catch: reportable fringe benefits
Even though the car is FBT-free, a grossed-up value ($20,755 a year in this example) appears on your income statement. It’s used for HECS repayments, the Medicare levy surcharge and some government payments.
What’s changing
- Plug-in hybrids lost the exemption for new leases from 1 April 2025.
- The government has proposed that from 1 April 2027, EVs valued over $75,000 get only a 25% FBT discount, and from 1 April 2029 all EVs get the 25% discount. Existing leases won’t be affected. This isn’t law yet.
Questions to ask the leasing company
- What is the interest rate, and what fees are included?
- What’s the residual (balloon) payment?
- What happens if I change jobs?
General information only, not financial or tax advice. See our disclaimer.