Novated Lease on an Electric Car: How It Works in Australia (2026)

A novated lease on an electric vehicle is one of the most tax-effective ways for employed Australians to get into an EV. Thanks to a fringe benefits tax (FBT) exemption on eligible electric cars, the savings can be substantial — but the rules have conditions worth understanding before you sign. Here's how it works in plain English.

This is general information, not financial or tax advice. Any tax outcome depends on your circumstances, and finance is subject to lender approval. Speak to a qualified adviser about your situation.

What is a novated lease?

A novated lease is a three-way arrangement between you, your employer and a financier. Your employer makes the lease payments from your salary — a mix of pre-tax and post-tax dollars — which can reduce your taxable income. You get to drive the car and bundle running costs into one regular payment.

Why electric cars are special: the FBT exemption

Normally a novated lease attracts fringe benefits tax. For eligible electric vehicles, an FBT exemption removes that tax, which is what makes EV novated leases so attractive. Because more of your lease can come out of pre-tax salary, the potential saving over a lease term can run into the thousands. [VERIFY current savings examples before publishing — these depend on income, vehicle and lease term.]

Which vehicles are eligible?

• Battery electric vehicles (BEVs) and hydrogen fuel-cell vehicles qualify.
• Plug-in hybrids (PHEVs) are no longer eligible for the exemption (changed from 1 April 2025), unless an existing arrangement met specific conditions. [VERIFY]
• The car must be at or below the luxury car tax threshold for fuel-efficient vehicles — $91,661 for the 2026-27 financial year.

How the savings work

Two things drive the benefit: paying for the car and many running costs from pre-tax salary, and avoiding FBT on an eligible EV. You can typically bundle registration, insurance, charging, servicing and tyres into the lease, paid from your salary. The exact saving depends on your income, the car's price and your lease term, so it's worth running the numbers for your situation. [VERIFY any figures or rates as indicative only and subject to change.]

What to watch out for

• Residual (balloon) value — there's a lump sum owing at the end of the lease set by ATO guidelines.
• Leaving your job — the lease goes with you, but payments shift if you change employers or stop salary packaging.
• Eligibility windows — the EV FBT exemption is legislated to run unchanged until 31 March 2027, after which changes apply; leases signed while it applies are generally grandfathered. [VERIFY dates.]
• Finance approval — a novated lease is finance and is subject to lender approval.

A worked example of how the money flows

The mechanics are easier to follow as a sequence than as a formula. Over a typical fortnight:

1. Your employer deducts an agreed amount from your salary before tax is calculated, which lowers your taxable income.
2. A further amount may be deducted after tax, depending on how the arrangement is structured.
3. Those funds cover the lease payment plus the budgeted running costs, typically charging, insurance, registration, servicing and tyres.
4. Because an eligible electric vehicle is exempt from fringe benefits tax, the employer does not incur an FBT liability that would otherwise need to be offset.

The size of the benefit scales with your marginal tax rate. Someone on a higher rate saves more from the same car than someone on a lower rate, because the pre-tax dollars being redirected were going to be taxed more heavily. [VERIFY - any figures are indicative only and depend entirely on your circumstances.]

The threshold that decides everything

The single most important number in an EV novated lease is the fuel-efficient luxury car tax threshold, because eligibility for the FBT exemption is tied to it. For 2026-27 that figure is $91,661.

This is a cliff, not a slope. A vehicle priced just under the threshold gets the full exemption. The same vehicle with enough options fitted to push it over loses the exemption entirely, and the cost of that is usually far larger than the options themselves.

Two practical consequences. Check whether the price used for the threshold test includes dealer-fitted accessories, because it generally does. And if your shortlist includes anything within a few thousand dollars of the line, get written confirmation of the assessment before you order.

Questions to put to a salary packaging provider

1. What annual kilometre figure is the running-cost budget based on, and what happens if I go over?
2. What interest rate has been applied, and is it the rate I will actually receive?
3. What is the residual in dollars, and on what date is it payable?
4. What fees apply over the lease, including establishment, monthly management and end-of-lease fees?
5. Is the quoted saving compared against buying outright, or against a car loan?
6. Are unused running-cost funds refunded to me at the end?
7. What is the process if I change employers mid-lease?

The comparison basis in question five is the one that most often makes a quote look better than it is. Comparing a novated lease against paying cash produces a very different figure from comparing it against a consumer car loan, and the second is usually the more relevant comparison.

When an EV novated lease does not stack up

• Your marginal tax rate is low, so there is less tax to save.
• Your employment is likely to change during the lease term.
• You cannot charge at home, which erodes the running-cost assumption in the budget.
• You want to own the vehicle outright without managing a residual.
• The car you want sits above the fuel-efficient threshold, removing the exemption.

In those situations a consumer car loan or an outright purchase can work out better. The comparison is worth running properly rather than assuming the lease wins because the exemption exists.

Getting the vehicle price right first

An often-missed point: the purchase price of the car flows straight into the lease calculation. A lease arranged on a vehicle bought at full retail costs more every fortnight for the entire term than the same lease on the same car bought competitively.

Sorting the price before the finance, rather than accepting whatever price the packaging provider's preferred supplier quotes, is one of the more effective things you can do. It also lets you compare a lease against a loan on identical vehicle pricing, which is the only fair comparison.

Is a novated lease on an EV worth it?

For many employed Australians buying an eligible electric car, a novated lease is one of the most cost-effective options available, especially while the FBT exemption applies. It tends to suit people on a steady salary who plan to keep the car for the lease term. It's less suited to those who may change jobs frequently or want to own the car outright with no end-of-lease residual. The only way to know is to compare it against paying cash or a standard car loan for your specific numbers.

Sort the car and the lease in one place

Rodar helps you do both halves of the deal: we make dealers compete on the drive-away price of your chosen EV, and we can arrange novated leasing and EV finance through our lender panel. One team, transparent pricing, indicative quotes tailored to you — subject to lender approval.

Rates, repayments and approval outcomes are indicative only and subject to lender approval, your circumstances and lender terms and conditions. Rodar Pty Ltd is an Authorised Credit Representative (ACR #555548) of Fintelligence Pty Ltd (ACL #511803). Prices and specifications are indicative and should be confirmed before you commit.