Since April 2022, eligible electric vehicles novated under a salary sacrifice arrangement are exempt from Fringe Benefits Tax entirely. For the right person — a PAYG employee earning $80,000+ considering an EV under $89,332 — this is one of the most significant tax incentives in the Australian personal finance landscape. This guide explains exactly how it works and what the savings look like in practice.
Prior to 1 April 2022, a car provided under a novated lease attracted Fringe Benefits Tax regardless of the vehicle type. The employer (via employee contribution) paid FBT on the benefit, which for a typical $60,000 vehicle amounted to roughly $9,000–$12,000 per year. This significantly reduced the tax advantage of novated leasing.
The Treasury Laws Amendment (Electric Car Discount) Act 2022 changed this. From 1 April 2022, eligible low-emission vehicles provided under a novated lease or as a car benefit are exempt from FBT. The employee keeps the full pre-tax salary sacrifice saving without the FBT contribution eating into it.
The FBT exemption for battery EVs is ongoing with no currently legislated end date. The PHEV exemption had a scheduled end date of 1 April 2025 — check the current ATO guidance for the latest position on PHEVs. Always verify the current status before making a financial decision based on this exemption.
| Vehicle Type | FBT Exempt? | Notes |
|---|---|---|
| Battery Electric Vehicle (BEV) | ✓ Yes | All BEVs below the threshold |
| Plug-in Hybrid (PHEV) | ⚠️ Check current status | Exemption had a scheduled end date — verify with ATO |
| Hydrogen fuel cell vehicle | ✓ Yes | Very limited models available in AU |
| Standard hybrid (non plug-in) | ✗ No | Not eligible |
| Petrol / diesel | ✗ No | Standard FBT applies |
Common eligible models in Australia (2025) include Tesla Model 3, Tesla Model Y, BYD Atto 3, BYD Seal, MG4, Hyundai IONIQ 6, Kia EV6, Polestar 2, and others — provided they're priced below the LCT threshold.
The FBT exemption only applies if the vehicle's purchase price (the "base value" for FBT purposes, which includes GST but excludes registration and insurance) is at or below the luxury car tax threshold for fuel-efficient vehicles — $89,332 for FY2024–25.
For vehicles priced above this threshold, the FBT exemption does not apply, and standard FBT treatment resumes. The threshold applies at the time of first provision of the vehicle — it's not re-assessed annually as the vehicle depreciates.
The FBT base value is typically the vehicle's list price including dealer delivery but excluding registration, CTP, and accessories. Some providers calculate this differently. Confirm the base value used with your novated lease provider before assuming exemption applies.
For a vehicle that's not exempt, annual FBT under the statutory formula is calculated as: vehicle price × 20% × 2.0802 (gross-up) × 47% (FBT rate). For a $72,000 EV, this would have been:
The FBT exemption is additive to the standard salary sacrifice saving. A PAYG employee earning $110,000 who novates a $72,000 EV over 3 years benefits from both:
In this example the EV novated lease costs approximately $1,564 less per month than a personal loan for the same vehicle — a saving of $56,300 over 3 years. Even accounting for the residual buyout required at the end of the lease, the net saving over a 3-year period is substantial.
Several state governments offer additional EV incentives that stack on top of the FBT exemption:
| State | Current Incentive (2025) | Notes |
|---|---|---|
| ACT | Interest-free loan up to $15,000 | For new EVs, zero-emission vehicles |
| NSW | $3,000 rebate (income tested) | For vehicles under $68,750 drive-away; verify current status |
| VIC | Stamp duty exemption | Some rebate schemes concluded — check current VIC policy |
| QLD | $3,000 rebate (income tested) | Verify current eligibility criteria |
| WA | $3,500 rebate | Verify current status |
| SA | Stamp duty exemption | For new EVs |
State EV rebate schemes change frequently — several programs have wound back, changed eligibility criteria, or had funding exhausted. Always check your state government's current transport or revenue office website before factoring rebates into your calculations.
The most useful comparison is three-way: EV novated (FBT exempt) vs equivalent ICE vehicle novated (FBT applies) vs personal loan. The Veercal calculator lets you toggle the EV setting and FBT exemption on and off to see the exact impact for your salary and vehicle price.
As a rough guide for a $70,000 vehicle, $100,000 salary, 3-year lease:
| Structure | Net monthly cost (est.) | 3yr total (est.) |
|---|---|---|
| EV Novated (FBT exempt) | ~$980–$1,100/mo | ~$35,300–$39,600 |
| ICE Novated (FBT applies) | ~$1,600–$1,800/mo | ~$57,600–$64,800 |
| Personal Loan (8.99%) | ~$2,000–$2,200/mo | ~$72,000–$79,200 |
These are illustrative ranges — your exact figures depend on salary, running costs, provider fees, and state charges. Use the calculator for your specific numbers.
Toggle EV mode in the Veercal calculator, enter your salary and vehicle price, and compare the EV novated lease against every other finance structure with your exact inputs.
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