What is an EV novated lease?

A novated lease lets you pay for a car and its running costs using pre-tax salary, reducing your taxable income. When you choose an electric vehicle, you get an extra layer of benefit: the Australian Government's Electric Car Discount exempts eligible EVs from Fringe Benefits Tax (FBT) entirely.

In practical terms, this means the entire salary sacrifice — finance repayments plus all running costs — comes from your pre-tax income with no offsetting post-tax contribution required. For petrol cars, you would normally need to make post-tax Employee Contribution Method (ECM) payments to bring FBT to zero. With an eligible EV, that step disappears.

How the FBT exemption works

Under the Treasury Laws Amendment (Electric Car Discount) Act 2022, battery electric vehicles (BEVs) and hydrogen fuel cell vehicles are exempt from FBT when all of the following apply:

The vehicle is a zero-emission BEV or hydrogen fuel cell vehicle
It was first held and used on or after 1 July 2022
The vehicle's value is at or below the luxury car tax threshold for fuel-efficient vehicles ($91,387 for 2025–26)
It is provided under a novated lease salary packaging arrangement

Plug-in hybrid vehicles (PHEVs) were included in the exemption until 31 March 2025. From 1 April 2025, new PHEV novated lease agreements no longer qualify — PHEVs are now treated the same as petrol vehicles for FBT purposes.

The key number: Without an EV, you need to make post-tax ECM contributions of approximately 20% of the car's value per year to offset FBT. On a $62,000 car that's $12,400/yr in post-tax contributions you avoid entirely with an eligible EV.

Real savings example — $95,000 salary, $62,000 EV

Here is a worked example using ATO 2025–26 rates for a salaried employee earning $95,000 leasing a $62,000 EV (e.g. BYD Sealion 7 or Tesla Model 3) over 3 years at 7.5% p.a.

Gross salary$95,000

Pre-tax salary sacrificeFinance + all running costs-$21,800

Taxable incomeAfter sacrifice$73,200

Tax saved (30% bracket)Income tax saving+$6,540

GST saved on car1/11th of $62,000+$5,636

FBT payableEV fully exempt$0

ECM post-tax requiredNot needed for EVs$0

Total annual benefitTax + GST combined$12,176

EV vs petrol on a novated lease — the extra saving

The FBT exemption is only part of the EV advantage. Running costs are also dramatically lower. At current fuel prices of around $2.40/litre, a typical petrol car costs $3,240/year to fuel for 15,000km. The equivalent EV costs around $525/year to charge at home — a saving of over $2,700/year on fuel alone.

Over a 3-year lease, that is more than $8,000 in fuel savings on top of the FBT and tax benefits.

Best EVs for a novated lease in Australia (2026)

The most popular EVs on novated leases in Australia right now, all under the $91,387 LCT threshold:

Tesla Model 3

From $56,900

Most popular. Long range, Supercharger network.

Tesla Model Y

From $65,900

Top seller March 2026. SUV practicality.

BYD Sealion 7

From $54,990

Strong value. Blade battery tech.

BYD Atto 3

From $44,990

Affordable entry point. Under $45k.

Kia EV6

From $67,990

Ultra-fast 800V charging.

Hyundai IONIQ 6

From $65,500

World Car of the Year 2023.

How to get started

Check your employer offers salary packaging (most medium and large employers do)
Use our calculator to estimate your exact savings with a specific car and salary
Get a formal quote from 2–3 novated lease providers to compare rates and fees
Choose a vehicle and have the provider handle the paperwork with your employer

Important: The FBT exemption applies to the employer. In practice, your salary packaging company structures the arrangement so the benefit flows through to you. Always confirm with your provider that the specific vehicle you are considering qualifies.