Why Electric Vehicles and Novated Leasing Are a Perfect Match?
Electric vehicles (EVs) are no longer a niche product. As prices fall and more models enter the Australian market, EVs are quickly becoming a viable choice for everyday drivers. But while the benefits of going electric are clear, lower running costs, fewer emissions, and quieter driving, the higher upfront price tag can still be a barrier.
Novated leasing helps bridge that gap. It offers a way to drive an EV without the usual financial strain, thanks to a range of tax advantages and a notable exemption from Fringe Benefits Tax (FBT) for eligible vehicles. If you’re considering an EV, here’s why novated leasing might be the smartest way to do it.
1. The Cost Challenge of Electric Vehicles in Australia
EVs are becoming more competitive in price, but they still tend to cost more than their petrol or diesel counterparts. Even with government rebates and reduced fuel and servicing costs, the initial purchase price can be a hurdle, especially for those considering financing options like personal loans.
This is where salary packaging can provide real financial relief.
2. How Novated Leasing Makes EVs More Affordable
With a novated lease, your car payments come out of your pre-tax income. That means you reduce your taxable income while paying for your vehicle, which results in meaningful tax savings. On top of that:
- You don’t pay GST on the purchase price of the car.
- Running costs like servicing, insurance, registration, and tyres can be bundled into your lease, also with pre-tax dollars.
- The result is lower take-home cost compared to a traditional loan or outright purchase.
Novated leasing makes it easier to manage the cost of an EV by spreading it across fixed, predictable payments that are often lower than after-tax loan repayments.
Learn More: Why EV Specials Are the Future of Car Buying?
3. The FBT Exemption That Changes Everything
As of recent changes in Australian tax law, eligible electric vehicles that fall under the luxury car tax threshold (currently $89,332 for EVs) are exempt from Fringe Benefits Tax.
This exemption applies to:
- Battery electric vehicles (BEVs)
- Hydrogen fuel cell vehicles (FCEVs)
- Plug-in hybrid electric vehicles (PHEVs) purchased before 1 April 2025
For employees, this means even more take-home savings. For employers, it means offering an attractive, cost-neutral benefit without the added FBT burden. It’s one of the few scenarios in salary packaging where both employer and employee clearly win.
4. Why Businesses Should Encourage EV Novated Leasing
For employers, offering novated leasing on electric vehicles is a no-brainer. It allows the business to:
- Support employees in transitioning to sustainable transport
- Align with ESG and environmental policies
- Offer a high-value perk with no additional cost
- Reduce payroll tax liabilities through salary packaging
Promoting EV novated leasing enhances the company’s benefits program and strengthens its reputation as a forward-thinking employer.
5. Which EVs Qualify for FBT Exemption?
To take advantage of the FBT exemption, employees must choose an eligible vehicle under the luxury car tax threshold. Some popular options include:
- Tesla Model 3
- BYD Atto 3
- MG4
- Hyundai Ioniq 5
- Kia EV6 (select models)
- Polestar 2
It’s important to confirm eligibility with your novated lease provider and ensure the vehicle meets the necessary criteria.
6. Conclusion
The rising popularity of electric vehicles is no longer just about sustainability; it’s also about smart financial planning. Novated leasing offers a way to make EVs more accessible and affordable, all while delivering tax savings and budget simplicity.
Thanks to the FBT exemption and pre-tax payment structure, EV novated leasing delivers more value than most employees realise. It’s a solution that works for drivers, supports employers, and contributes to a cleaner future on Australian roads.
Thinking about going electric? Talk to One Car Group about how a novated lease can make your EV more affordable.
