EV novated leases: the FBT exemption, which cars qualify and the 2027 changes
An electric car on a novated lease is exempt from fringe benefits tax (FBT) if it's a battery electric or hydrogen fuel cell car, it was first held and used on or after 1 July 2022, it's used by a current employee or their family, and luxury car tax has never been payable on it. When it qualifies, the whole package, running costs included, can come from pre-tax pay, which is why an EV novated lease usually beats a car loan by a wide margin.
The government has announced a phase-down of the exemption for leases committed to from 1 April 2027. It is not law yet. Use the checker below to see whether your car qualifies today and how the proposal would treat it, then read on for each test, the luxury car tax threshold by year, used EVs and plug-in hybrids.
By Better Rate Mate Editorial Team · Last reviewed
Is my EV FBT-exempt?
Runs the ATO's electric cars exemption tests on your answers. General information, not tax advice.
Under current law
Looks FBT-exempt
- Battery electric and hydrogen fuel cell cars can qualify.
- $60,000 is within the 2026–27 fuel-efficient luxury car tax threshold of $91,661.
The car must also be used by a current employee or their family. Even when exempt, the benefit is reported on your income statement as a reportable fringe benefit.
Announced from 1 April 2027: not law yet
A lease committed to before 1 April 2027 would keep the full exemption until the commitment ends. Refinancing, changing the residual or term, adding accessories or changing employer would end that protection.
Announced in the 2026–27 Budget. The ATO says: "This measure is not yet law." The base value is treated here as the car's value you entered; the final law may differ.
The tests are the ATO's, from its electric cars exemption page, and the thresholds are its luxury car tax table. To see what the exemption is worth on your salary, use the EV novated lease calculator.
Is my EV FBT-exempt? The ATO's four tests
The ATO says you don't pay FBT on the private use of an electric car that meets all of these:
- It's a zero or low emissions vehicle: a battery electric or hydrogen fuel cell electric car, designed to carry a load of less than one tonne and fewer than 9 passengers including the driver. Electric motorcycles and scooters aren't cars for FBT and don't qualify.
- The first time the car was both held and used was on or after 1 July 2022. A car ordered earlier but first used after that date can qualify; a car first used before it can't, whoever owns it now.
- It's used by a current employee or their associates, such as family members.
- Luxury car tax has never been payable on its importation or sale.
What the exemption covers
The private use of the car and associated car expenses: registration, insurance, repairs and maintenance, and fuel, including the electricity to charge it. A home charging station isn't a car expense for the exemption. Benefits provided through salary packaging are included.
The luxury car tax test, year by year
The ATO says the car's value must be below the luxury car tax threshold for fuel-efficient vehicles at the time it's first sold in a retail sale, and in any subsequent sale. The threshold that matters is the one for the financial year of that first retail sale, not this year's. The ATO's own example is a car bought new on 1 July 2022 for $85,000, above the 2022–23 threshold, which therefore can never be exempt.
| Financial year of first retail sale | Fuel-efficient threshold | Other vehicles |
|---|---|---|
| 2022–23 | $84,916 | $71,849 |
| 2023–24 | $89,332 | $76,950 |
| 2024–25 | $91,387 | $80,567 |
| 2025–26 | $91,387 | $80,567 |
| 2026–27 | $91,661 | $80,809 |
Plug-in hybrids
From 1 April 2025 a plug-in hybrid isn't a zero or low emissions vehicle under FBT law, so a new lease on one attracts FBT like a petrol car. A plug-in hybrid already on an exempt lease can keep the exemption while a financially binding commitment made before that date continues, but an optional extension, a change to the payments or residual, or a new employer ends it.
Used EVs on a novated lease
A used electric car can qualify, but both dates matter. It must have been first held and used on or after 1 July 2022, and its value at its first retail sale must have been under that year's fuel-efficient threshold. If you're buying second hand, the ATO says you need to work out whether luxury car tax was ever payable on it, from the car's ownership and sale records and the threshold table above.
The reportable fringe benefit: the catch
The exemption removes the tax, not the reporting. Your employer still reports the benefit on your income statement as a reportable fringe benefits amount, worked out at the full 20% rate and grossed up at 1.8868. On a $50,000 electric car that's about $18,868 a year. You don't pay income tax on it, but it counts in income tests such as the Medicare levy surcharge, the private health insurance rebate, study loan repayments, family assistance and child support.
The proposed changes from 1 April 2027 (not law)
In the 2026–27 Budget the government announced it will phase the exemption down, and Treasury consulted on draft legislation in September 2026. It is not law: the ATO's page, re-checked on 10 October 2026, still says "This measure is not yet law." No bill had been introduced to Parliament when we checked the Parliament's bills list on 10 October 2026. Under the proposal, leases committed to before 1 April 2027 keep the full exemption until the commitment ends, but refinancing, changing the residual or term, adding accessories or changing employer would end that protection.
In our $50,000 example, a lease committed to between 1 April 2027 and 31 March 2029 would still pay no FBT (the car is under the $75,000 cap), so the saving against a car loan stays about $27,962. A lease committed to from 1 April 2029 would get the 25% discount only, and the saving would fall to about $13,644.
| Lease committed | Base value up to $75,000 | Base value above that, up to the LCT threshold |
|---|---|---|
| Before 1 April 2027 | Full exemption until the lease ends | Full exemption until the lease ends |
| 1 April 2027 to 31 March 2029 | 100% FBT discount | 25% FBT discount (15% statutory rate) |
| From 1 April 2029 | 25% FBT discount (15% statutory rate) | 25% FBT discount (15% statutory rate) |
Is an EV novated lease worth it?
For an eligible electric car on a middle or higher income, usually yes. In our $50,000 example over 5 years at 9.50% on a $100,000 salary, the lease comes out about $27,962 ahead of a car loan and about $11,934 ahead of paying cash, because the whole package comes from pre-tax pay. A $500 establishment fee and $15 a month in management fees trim the loan saving to $27,016.
It's weaker if you might change jobs during the lease, if the provider won't show you the interest rate and fees, or if the reportable fringe benefit would push you over an income test threshold. Run your own salary, car and quote through the EV novated lease calculator, which has a price table from $40,000 to $90,000.
Charging an EV on a novated lease
Electricity to charge an eligible car is an exempt car expense. Because home charging can't usually be metered separately, the ATO lets employers use a shortcut home charging rate instead of actual costs: 5.47 cents per kilometre for the FBT year ending 31 March 2027. A home charging station itself isn't covered by the exemption.
What to watch for
- A used EV first used before 1 July 2022, or sold new above that year's luxury car tax threshold, can never be exempt.
- Plug-in hybrids: new leases attract FBT from 1 April 2025.
- The reportable fringe benefit, which can affect the Medicare levy surcharge, study loan repayments and family payments.
- Refinancing, extending or changing a lease can end the protection for leases committed before 1 April 2027 under the proposal.
- Headlines that treat the 2027 phase-down as settled: it isn't law until Parliament passes it.
Common questions
Is my EV FBT-exempt?
It is if all four of the ATO's tests are met: it's a battery electric or hydrogen fuel cell car, first held and used on or after 1 July 2022, used by a current employee or their family, and luxury car tax has never been payable on it (its value at first retail sale was under that year's fuel-efficient threshold, $91,661 for 2026–27). The checker on this page runs the tests.
Are plug-in hybrids still FBT-exempt?
Not for new arrangements. Plug-in hybrids stopped being zero or low emissions vehicles for the exemption from 1 April 2025. One already on an exempt lease can stay exempt while a financially binding commitment made before that date continues.
Is the EV novated lease exemption ending?
The government has announced a phase-down from 1 April 2027, but it isn't law yet. Under the proposal, leases committed to before then keep the full exemption until they end; later leases on cars with a base value of $75,000 or less would still get a 100% discount until 31 March 2029, and a 25% discount after that.
Can I get a novated lease on a used electric car?
Yes, if the car was first held and used on or after 1 July 2022 and was under the luxury car tax threshold for fuel-efficient vehicles when it was first sold at retail. Check the car's sale records against the threshold for that year.
Is novated leasing an EV worth it?
Usually, for an eligible car on a middle or higher income: in our $50,000 example it's about $27,962 ahead of a car loan over 5 years. It's weaker if you may change jobs, if fees are high, or if the reportable fringe benefit pushes you over an income test threshold.
Do I pay tax on an EV novated lease?
Not FBT, if the car qualifies, and the pre-tax package lowers your income tax. But the benefit is reported on your income statement as a reportable fringe benefits amount, which counts in income tests such as the Medicare levy surcharge.
General information only
This page explains the electric car FBT exemption under current law and the announced (not yet legislated) changes. It isn't tax or financial advice: for advice on your situation, speak to a registered tax agent. We don't recommend lease providers.
