Novated Lease on an Electric Vehicle
An electric vehicle is where a novated lease is at its most powerful. Eligible EVs priced under the luxury car tax threshold for fuel-efficient vehicles are exempt from Fringe Benefits Tax, which means the entire lease — finance, running costs and GST — can come out of your pre-tax salary. That's the single biggest lever in salary packaging a car today.
Why the EV FBT exemption changes the maths
Normally a novated lease creates a fringe benefit, and the FBT on it claws back much of the tax you'd otherwise save. The EV exemption removes that FBT entirely for eligible zero-emission cars under the fuel-efficient luxury car tax threshold. With no FBT to offset, you package the whole cost pre-tax and keep the full income-tax saving.
In practice that can mean thousands of dollars a year for a middle-income earner, because you're funding the car — and its running costs — with dollars that were never taxed at your marginal rate. The higher your marginal rate, the larger the saving.
The luxury car tax threshold is the catch
The exemption only applies below the fuel-efficient vehicle luxury car tax (LCT) threshold, which is indexed each year. An EV priced above it doesn't get the exemption, so the sticker price matters — a car just under the line is treated very differently to one just over it.
You also can't claim the exemption and still salary-package the car as if FBT applied; the calculator handles this automatically by switching the FBT treatment based on the vehicle type and price you enter.
Running costs are part of the package
A novated lease bundles more than the finance payment. Electricity for charging, insurance, registration, servicing and tyres can all be packaged, and EVs typically win on running costs — no fuel, fewer moving parts, cheaper servicing. Model your real annual kilometres and home electricity rate to see the running-cost side clearly.
This is general information, not financial or tax advice. FBT and luxury car tax thresholds are indexed and salary-packaging rules change — figures reflect FY2026-27 settings. Confirm the current treatment with your lease provider, employer and the ATO before committing.
I'm a geologist-turned-builder who got frustrated with financial calculators that hand-wave how Australian tax actually works.
Every projection on MyNextDollar runs on current ATO mechanics for FY2026-27 — Stage-3 brackets, super contribution caps and HELP thresholds.
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