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

If you are thinking about an electric car, a novated lease is probably already on your radar. It is where much of the saving on an EV sits for employed Australians. It is also where the rules have moved the most: plug-in hybrids dropped out in 2025, and further changes have been announced from 2027.

The good news is that the rules are clear enough to plan around, and you do not have to work them out alone. Below is what qualifies, the price line that decides eligibility, what has been announced for 2027 and beyond, and what it means if you are about to sign. If you are new to novated leasing in general, start with whether novated leasing is worth it, which explains how any novated lease works.

How the EV exemption works

On most novated leases, part of each payment comes from after-tax pay to cancel fringe benefits tax (FBT). On an eligible electric car there is no FBT to cancel. Far more of the cost comes out of pre-tax salary, and that is where the bigger saving comes from. The cost of charging the car is covered by the exemption too.

A car is eligible when it meets all of these conditions:

• It is a battery electric or hydrogen fuel cell car.
• It was first held and used on or after 1 July 2022.
• Luxury car tax has never been payable on it, which in practice means its value sits under the fuel-efficient threshold.
• It is used by a current employee or their family.

The exemption is from FBT, not from reporting. The benefit still shows on your income statement as a reportable fringe benefits amount. It is not taxed as income, but it counts in income tests for some government benefits and obligations.

The $91,661 threshold is a cliff

The fuel-efficient luxury car tax threshold is $91,661 for 2026-27. A car under it can get the full exemption. A car over it gets none.

There is no sliding scale in between. A car that starts under the line and then has options added can tip over it and lose the exemption entirely, and that usually costs far more than the options did.

The value tested includes accessories fitted before delivery or arranged through the seller. If the car on your shortlist is within a few thousand dollars of the line, confirm the assessed value in writing before you order.

Plug-in hybrids are out

Plug-in hybrids lost the exemption for new arrangements from 1 April 2025. A plug-in hybrid that was already in use under a financially binding commitment before then keeps it until that commitment ends. Anyone starting a new lease on a plug-in hybrid today attracts FBT in the usual way, which is normally cancelled with after-tax contributions.

What has been announced from 1 April 2027

In the May 2026 Budget, the government announced a phase-down of the exemption. It is subject to legislation: a draft bill has been released for consultation, but it is not law yet.

Above the fuel-efficient threshold there is no exemption and no discount in any period. Under the draft bill, the $75,000 test uses the car's base value when your employer first holds it.

What this means if you sign now

A lease you sign today can run well past 1 April 2027. Nobody can yet tell you for certain how the final law will treat it. The draft bill includes transitional rules for arrangements already in place, but a draft can change before it passes, so do not sign on the basis that your lease is protected.

A few practical steps help:

• Ask the provider in writing how your quote treats the announced changes, and what happens to your payments if the law passes as announced.
• Look at the term. A shorter lease leaves less of it exposed to rules that are still being settled.
• Watch the $75,000 line as closely as the $91,661 one. From 1 April 2027, a car just over $75,000 is announced to get a 25% discount rather than the full exemption.
• Check the saving still works without the full exemption for the later years of the lease, so a change does not catch your budget out.

Questions to ask a novated lease provider

• What annual kilometres is the running cost budget based on, and what happens if I go over?
• What interest rate has been applied, and is it the rate I will actually get?
• What is the residual in dollars, and on what date is it due?
• What fees apply over the lease, including establishment, monthly management and end of lease?
• Is the saving shown compared with paying cash, or with a car loan?
• Are unused running cost funds refunded to me at the end?
• What happens if I change employers part way through?
• How does this quote treat the changes announced from 1 April 2027?

The comparison in the fifth question matters most. A novated lease looks very different against paying cash than it does against a car loan, and the car loan is usually the fairer test.

When an EV novated lease does not stack up

• Your income is on the lower side, so there is less tax to save.
• Your job is likely to change during the lease.
• You cannot charge at home, which pushes up the running cost budget.
• You would rather own the car outright with no residual at the end.
• The car you want sits over the fuel-efficient threshold.

In those cases a car loan or paying outright can work out better. It is worth running the numbers rather than assuming the lease wins because the exemption exists.

How Rodar helps with an EV novated lease

Choosing an electric car is a big enough decision without the tax rules shifting underneath it. You should not have to become an FBT specialist to get a fair deal.

We can do the legwork. Tell us the electric car you want, down to the grade and colour. We find it across our network of over 1,000 trusted automotive dealers and manufacturers, and set up the novated lease or car finance through our lender panel. The price of the car flows into every lease payment, so we sort the car and the lease together and you can see where your numbers land against the thresholds before you commit.

This is general information, not financial or tax advice, and the announced changes are subject to legislation. Please speak with a licensed adviser or tax agent about your own situation before you sign.

Whenever you are ready, get your competitive offers, or read our FAQs first. Take your time.

Rates and repayments are indicative only and subject to lender approval. Rodar Pty Ltd is an Authorised Credit Representative (555548) of Fintelligence Pty Ltd (ACL 511803).