EV Novated Lease Australia: Tesla, BYD and the FBT Exemption

Why EVs on a novated lease are a different beast🔗

With a petrol car, private use creates an FBT bill, so employees make an after-tax employee contribution (the ECM) to cancel it out, which eats into the saving. With an eligible EV there is no FBT at all. No ECM, so the entire package (lease repayment, registration, insurance, maintenance and electricity to charge the car) is salary sacrificed from pre-tax dollars.

That is the structural reason an EV novated lease can save tens of thousands versus buying the same car with a loan. And the higher your marginal rate, the bigger the saving: every pre-tax dollar sacrificed at the 32.5% bracket saves 32.5 cents of tax, more at 37% or 45%.

Which EVs qualify for the FBT exemption?🔗

The ATO requires all of the following:

• A battery electric or hydrogen fuel-cell vehicle (PHEVs no longer qualify, see below)
• A “car” carrying fewer than 9 people and under 1 tonne (no motorbikes)
• First held and used on or after 1 July 2022
• Under the fuel-efficient LCT threshold of $91,387 (2025-26)
• LCT must never have been payable on it

Plug-in hybrids stopped being eligible on 1 April 2025. A PHEV can only stay exempt if it was already in use and there was a financially binding commitment before that date. Optional extensions exercisable on or after 1 April 2025 do not count, and the ATO has no discretion to extend. For a new lease, choose a battery EV.

Nameplate is not enough: on some models only the lower trims sit under the threshold (the top Hyundai Ioniq 5, for example, creeps over). On-road costs can also tip a borderline car over, so confirm the exact figure before you sign.

What running costs are covered?🔗

For an eligible EV, these are bundled into the pre-tax salary sacrifice: registration, insurance, servicing and maintenance, tyres, roadside assistance, and electricity to charge the car (home and public charging both count). That charging point is a genuine bonus most people miss.

What is not covered: the home charger hardware itself. Installing a wall charger is a separate property fringe benefit, not an associated car cost, so most people pay for it outside the lease. The ATO's PCG 2024/2 sets a home-charging rate method your provider or tax agent can apply.

Worked example: Tesla Model Y vs a car loan🔗

Illustrative only (actual figures depend on your salary, state, provider fees and running costs). Assume a $95,000 salary, a Tesla Model Y RWD at roughly $63,000 drive-away, a 5-year term, 15,000 km a year and a 32.5% marginal rate.

The saving is real, but so is the residual: at the end you pay roughly 28.13% of the car's cost to own it outright, refinance into a new lease, or hand it back. Budget for it from day one.

The reportable fringe benefits catch (read this bit)🔗

Here is the part most people gloss over. Even though an eligible EV is FBT-exempt, the benefit is still a reportable fringe benefit. The grossed-up value shows on your income statement each year. It is not added to your assessable income, so it does not raise your ordinary tax bill, but it is counted in your adjusted taxable income for several tests:

• The Medicare levy surcharge (if you lack private hospital cover)
• Division 293 tax on high earners' super contributions
• Family Tax Benefit, Child Care Subsidy and other means-tested payments
• HECS/HELP repayment thresholds

For most people on average salaries this is a non-issue. If you sit near any of these thresholds, have a quick chat with an accountant before signing.

End of lease, and who it suits🔗

At the end of a 5-year lease, the ATO minimum residual is 28.13% of the vehicle's cost, paid from after-tax dollars. You can own it, refinance, or hand it back. See the full novated lease guide for the end-of-lease detail.

It suits you if you are a permanent employee (not a contractor or sole trader, who have no employer to set it up), on the 32.5% bracket or higher, want a new EV, and have reliable charging. It probably does not if you are self-employed, on the lowest bracket, want a petrol car, or sit right on an income-test threshold the RFBA could nudge you over.

Frequently asked questions🔗

Keep reading🔗

• Salary sacrifice a car: the full novated lease guide
• Salary sacrifice and adding to super
• Division 293 tax on high earners' super