Novated Lease on a Plug-in Hybrid
Plug-in hybrids sit in a middle ground. They qualified for the same FBT exemption as electric vehicles until 1 April 2025 — but from that date the exemption no longer applies to new plug-in hybrid arrangements. Existing eligible leases entered before the cut-off can be grandfathered under transitional rules, so timing is everything with a PHEV.
The 1 April 2025 cut-off
The EV FBT exemption was deliberately extended to plug-in hybrids for a limited window. That window closed on 1 April 2025 for new commitments. If you enter a new PHEV novated lease after that date, it's treated like a conventional car for FBT — you don't get the exemption.
There is a grandfathering provision: if you had a financially binding commitment in place before 1 April 2025 and it continues without a break, the exemption can carry on for that arrangement. Change or renew it, though, and the concession is generally lost.
What a post-cut-off PHEV lease looks like
Without the exemption, a PHEV novated lease works like any petrol or diesel car: FBT applies, usually calculated by the statutory formula, and that cost offsets part of the pre-tax saving. It can still be worthwhile — the GST saving on the purchase and running costs, plus packaging from pre-tax salary, remain — but the headline tax benefit is smaller than an EV's.
Because a PHEV runs on both electricity and petrol, model both energy costs: home charging for short trips and fuel for longer ones. The blend is what determines whether a PHEV's running costs land closer to an EV's or a conventional car's.
EV versus PHEV, purely on tax
If the FBT exemption is your main reason for leasing, a fully electric vehicle now has a clear edge for any new arrangement, since it keeps the exemption while a new PHEV lease does not. If you already hold a grandfathered PHEV lease, the picture is different — model your specific arrangement rather than assuming the general rule applies.
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.
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