Novated Leases & Electric Car Tax Savings
A novated lease lets you pay for a car through your salary, often partly from your pre-tax pay. For eligible electric cars, it can mean big tax savings. Here is how it works.
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How a novated lease works
- A three-way agreement between you, your employer and a finance company
- Lease and running costs are paid from your salary – partly before tax
- Fringe benefits tax (FBT) rules apply to the car benefit
- Many people pay part from after-tax pay to reduce FBT (the employee contribution method)
Electric cars and the FBT exemption
Current exemption
Eligible zero or low emissions cars under the luxury car tax threshold for fuel-efficient vehicles can be exempt from FBT.
Plug-in hybrids
Plug-in hybrids generally stopped qualifying for new arrangements from 1 April 2025.
Announced changes from 1 April 2027
The government announced the exemption will be scaled back: cars costing $75,000 or less keep the full exemption for a period, while more expensive cars move to a 25% FBT discount.
Existing leases
Existing leases are not expected to be affected by the announced changes.
Things to check before you sign
- The total cost over the lease – including fees and the residual (balloon) payment
- What happens if you change jobs
- How the car affects your reportable fringe benefits (which can affect HELP repayments and some government payments)
- Whether the car qualifies for the electric car exemption
How UV TAX helps
- Explain the tax effect on your income
- Check reportable fringe benefits in your tax return
- For employers: manage FBT returns and reporting
⚠️ General information only – not tax or legal advice. UV TAX is not a lender, broker or credit licensee and does not recommend lease or finance products. Announced FBT changes may depend on legislation. Compare offers carefully and seek appropriate advice. This page is a simple overview as at November 2026 and does not consider your personal circumstances. Tax laws, rates and thresholds change regularly. Please get advice for your situation before acting.
Thinking about a novated lease?
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0466 268 405Frequently asked questions
What is a novated lease?
An agreement where your employer pays car lease and running costs from your salary, often partly before tax.
Are electric cars exempt from FBT?
Eligible electric cars under the relevant luxury car tax threshold can currently be exempt. Changes from 1 April 2027 have been announced.
Do plug-in hybrids still qualify?
Generally not for new arrangements from 1 April 2025.
Does a novated lease affect my tax return?
The car benefit may be shown as a reportable fringe benefit, which can affect some income tests.
Related
General information current as at November 2026.