Novated lease electric car discount explained
If you get an eligible electric vehicle (EV) or plug-in hybrid electric vehicle (PHEV) through a novated lease, you could save thousands of dollars more than you would with a non-EV or if you’d paid for exactly the same car another way.
This is because eligible electric car novated leases are exempt from fringe benefits tax (FBT). It means you can pay for 100% of the cost of the lease, including packaged running costs, using pre-tax salary.
How it makes an EV novated lease cheaper
Here’s what the Australian Federal Government’s Electric Vehicle Discount policy means:
- EVs and PHEVs valued up to the luxury car tax threshold ($89,332 in FY 23/24) are exempt from FBT.
- The exemption applies to passenger vehicles that can carry a load of less than one tonne.
- Used cars are eligible if they were first used after 1 July 2022.
- For eligible PHEVs, the exemption applies to novated leases that commence before 1 April 2025.
- As well as the cost of the car itself, related car running costs are also exempt from FBT. That means charging costs, car insurance, registration, servicing and tyres.
This policy has had a significant impact on EV sales in Australia already, with 98,429 EVs and PHEVs sold in 2023 compared to 39,437 in 2022.
){kind=icon}
Example electric vehicle savings with a novated lease
| EV Novated lease | Buy outright | Car loan | |
|---|---|---|---|
Vehicle cost (Tesla Model 3 RWD) | |||
Vehicle price | $67,142 | $67,142 | $67,142 |
GST saving on vehicle | -$5,791 | n/a | n/a |
Income & tax deductions | |||
Annual income | $120,000 | $120,000 | $120,000 |
Annual novated lease costs including running costs (pre-tax) | -$17,588 | n/a | n/a |
Annual taxable income | $102,412 | $120,000 | $120,000 |
Annual income tax saving | $6,084 | n/a | n/a |
After tax costs | |||
Annual after-tax car loan repayments (7.50% p.a. interest) | n/a | n/a | $16,328 |
Annual after-tax car running cost | n/a | $3,948 | $3,948 |
The outcome | |||
Net cost of novated lease (after tax) | $57,520 | n/a | n/a |
Residual payment | $18,984 | n/a | n/a |
Total cost of paying for car & running costs over 5 years | $76,504 | $86,902 | $101,400 |
Cost difference | +$10,398 | +$24,896 |
Get the best deal on a novated lease
Find my best dealList of EVs and PHEVs eligible for $0 FBT through a novated lease
Alfa Romeo
BMW
BYD
- BYD Atto 3 Standard
- BYD Atto 3 Extended
- BYD Dolphin Dynamic
- BYD Dolphin Premium
- BYD Seal Dynamic
- BYD Seal Premium
- BYD Seal Performance
Cupra
Ford
Fiat
GWM
Hyundai
- Hyundai Kona Elite Standard Range
- Hyundai Kona Elite Long Range
- Hyundai Kona Highlander Standard Range
- Hyundai Kona Highlander Long Range
- Hyundai Ioniq 5 Dynamiq
- Hyundai Ioniq 5 Techniq
- Hyundai Ioniq 5 Epiq
- Hyundai Ioniq 6 Dynamiq
- Hyundai Ioniq 6 Techniq
- Hyundai Ioniq 6 Epiq
Kia
- Kia Niro S
- Kia Niro GT-Line
- Kia Niro Plus S
- Kia EV6 Air
- Kia EV6 GT-Line RWD
- Kia EV6 GT-Line AWD
- Kia Sorento GT-Line PHEV
Lexus
Mazda
Mercedes
MG
Mini
Mitsubishi
- Mitsubishi Eclipse Cross PHEV ES
- Mitsubishi Eclipse Cross PHEV Aspire
- Mitsubishi Eclipse Cross PHEV Exceed
- Mitsubishi Outlander PHEV ES
- Mitsubishi Outlander PHEV Aspire
- Mitsubishi Outlander PHEV Exceed
- Mitsubishi Outlander PHEV Exceed Tourer
Nissan
Peugeot
- Peugeot e208 (coming in 2024)
- Peugeot e2008
- Peugeot 308 GT- Sport PHEV
- Peugeot 3008 GT PHEV
- Peugeot 408 PHEV (coming soon)
- Peugeot 508 GT PHEV
Polestar
Renault
Tesla
Volvo
The list above is based on vehicles with an estimated cost below the luxury car tax threshold, as at February 2024. On-road costs, such as dealer delivery, standard and statutory warranties, accessories, modifications and treatments to the car before it's delivered may impact the cost for the purpose of working out luxury car tax, according to the ATO.
The most popular EVs being novated in 2024
The Tesla Model Y is the clear favourite among Aussie EV drivers. But there are several other brands making an impact, both at the more affordable and premium ends of the market.
Here are the some of the most popular EVs Novated Lease Australia’s customers are choosing:
)
The most popular PHEVs being novated in 2024
For drivers looking for a more gradual transition to an electric vehicle, these are the plug-in hybrids proving popular with our customers:
- Mitsubishi Outlander PHEV
- Mitsubishi Eclipse Cross PHEV
- Cupra Formentor PHEV
- Kia Sorento PHEV
- Mazda CX-60 PHEV
- MG HS+ PHEV
To learn how much more you can save with a novated lease speak to one of our team today.
)
Get the best deal on a novated lease
Find my best dealCommonly asked questions about an EV novated lease
What costs can I include in my EV novated lease?
Your EV novated lease will involve a single regular salary sacrificed car payment made directly from your pre-tax income by your employer. This payment will cover the cost of leasing the car, plus:
- Charging costs
- Comprehensive car insurance
- Vehicle registration
- Servicing
- Tyres
- Car washes
- Charging cable (if required)
If the vehicle you are leasing is eligible for an FBT exemption, your related running costs will also be exempt from FBT, according to the ATO.
How do I claim back charging costs on my electric car novated lease?
You can claim back charging expenses using the Novated Lease Australia driver portal. There are a few ways you can do this:
- If you incurred the expense at a public charger, you can simply upload your receipt and the cost will be refunded to you from your car-running budget.
- If you use a home charger, you can upload a power bill and indicate what portion of the bill is accounted for by charging costs for the vehicle you are leasing.
- Or you can simply claim 4.2 cents per kilometre you drive by uploading a picture of your odometer.
What costs are excluded?
According to the ATO, you cannot cover the cost of a home-charging station for your electric vehicle through a novated lease. Likewise, a replacement battery or car charger that significantly improves the performance of your vehicles cannot be included.
You also cannot cover ongoing costs that are not required to keep your vehicle on the road, including car parking costs, tolls or fines.
How long will the lease term be for my EV?
Your EV novated lease term can be set for any duration between one and five years. With Novated Lease Australia, even ‘odd’ terms are allowed, i.e. not a full year (e.g. 30 months).
Our consultants can talk you through what your choice of lease term could mean for your costs, as well as any other implications.
What will happen when the lease ends?
When the term ends on your EV novated lease, you will have the option to:
- renew your lease for a new term with the same EV or PHEV (continuing the tax benefits)
- upgrade to a new vehicle by starting a new novated lease agreement
- pay the residual to own the car outright and continue to drive the same vehicle (the novated lease tax benefits will end at this point)
When deciding what lease term is best for you, bear in mind that there are some key dates for the Electric Car Discount policy coming down the track:
- Only leases on PHEVs that commenced before 1 April 2025 will be exempt from FBT. If you extend an existing lease on the same vehicles after this date, this will be considered a new lease and will not be exempt from FBT, according to the ATO.
- The Government has said it is due to review the overall policy by mid 2027.
Can I still claim other Government incentives on EVs if I pay for the vehicle through a novated lease?
This may be possible but will depend on what state or territory you live in and what specific rules and exemptions are applied to the EV incentives available there. You can check our EV incentives guide for details or check directly with your local state or territory Government. Our expert consultants are located all across Australia and can also offer information on what incentives you may be eligible for beyond the novated lease electric car FBT exemption.
Popular EV and PHEV brands Australians are novating
)
)
)
)
)
)
)
)
Written by
)
CEO
Bevan Guest
Reviewed by
)
Editor
Sean Callery
