How a novated lease works for EVs
A novated lease combined with the federal FBT exemption is one of the most tax-effective ways to buy an electric vehicle in Australia. Here's how the saving is generated.
Your employer deducts lease payments pre-tax
Instead of paying for the car from your take-home pay, your employer deducts the lease payments from your gross salary — before income tax is calculated.
FBT exemption eliminates the usual tax catch
Normally, a car provided by an employer attracts Fringe Benefits Tax. For eligible EVs, this FBT is waived entirely — meaning 100% of the deduction is pre-tax.
Your employer claims the GST back
Because the employer purchases the car, they can claim the GST (1/11th of the base price) back from the ATO — effectively reducing the cost of the car.
You save at your marginal tax rate
Every dollar deducted pre-tax saves you money at your marginal income tax rate (up to 47% incl. Medicare). Higher salary = bigger saving.
Frequently asked questions
Which EVs are eligible for the FBT exemption?
Battery electric vehicles (BEVs) with a drive-away price below the Luxury Car Tax threshold ($91,387 in 2024-25) are eligible. Most popular EVs in Australia qualify, including Tesla Model 3, Model Y, BYD Atto 3, MG4, Hyundai Ioniq 5, and more.
Do I need to earn a minimum salary?
There is no minimum salary requirement, but the tax saving is larger the higher your marginal rate. At $45,000 salary your marginal rate is 21% (incl. Medicare). At $120,000+ it's 39–47%. The calculator adjusts automatically.
What is the ATO residual value?
The ATO prescribes minimum residual values based on the lease term: 65.63% for 1 year, 56.25% for 2 years, 46.88% for 3 years, 37.50% for 4 years, and 28.13% for 5 years. This is the balloon payment at the end of the lease.
Can I include charging costs in the novated lease?
Yes. Home charging electricity costs, registration, insurance, and servicing can all be bundled into the pre-tax deduction under a fully maintained novated lease (FMLT), further increasing your tax saving.
What happens if I change jobs?
If you leave your employer, the novated lease typically becomes your personal liability. Most providers allow you to transfer the lease to a new employer, or you can take over payments personally.
This calculator provides estimates only and does not constitute financial advice. Tax rates are based on 2024–25 ATO schedules. Consult a qualified financial adviser or novated lease provider before making decisions.