The Employee Contribution Method (ECM) is designed to offset any potential liability for Fringe Benefits Tax (FBT) on your novated lease. By making both after-tax and pre-tax contributions through your salary, you can reduce the taxable value of your car fringe benefit to NIL, thereby eliminating and FBT liability by the end of the FBT year (which ends on 31 March).

The FBT Exempt Method allows for the exemption of FBT payments on eligible electric vehicles up to the Luxury Car Tax threshold of $84,916 (2022-23 tax year). With this method, all payments for the novated lease are deducted from your pre-tax salary. Unlike the ECM, there is no post-tax component if the Luxury Car Tax Value is below the threshold.  However, employers are required to include FBT-exempt electric cars as a reportable fringe benefit on an employee’s payment summary.

We recommend you seek independent financial advice on what impact this could have to your personal circumstances, including means-tested government benefits.