Important: The information in this guide is general in nature and does not constitute personal financial, tax, or legal advice. Tax savings depend on your individual circumstances including income, employment arrangements, and eligibility. Before making decisions about novated leasing, we strongly recommend consulting a qualified tax professional or licensed financial adviser. BatteryIQ does not provide tax advice or financial product advice.
Why BatteryIQ Covers This
You might wonder why a site about home batteries is talking about car leasing. Here's the connection:
EVs Unlock Better Energy Plans
When you get an EV, you gain access to EV-specific electricity plans with dramatically lower off-peak rates — some as low as 8c/kWh overnight, or even free charging windows during solar hours. These plans can slash your charging costs to near-zero.
The problem? Most EV owners don't optimise their energy plan after getting their car. They keep paying 35-40c/kWh when they could be paying a fraction of that — or nothing at all with solar + battery.
This guide covers the tax benefits of getting an EV. But the real savings come when you pair your EV with:
- The right energy plan — EV tariffs with cheap overnight or free midday charging
- Solar panels — Generate your own fuel for free
- A home battery — Store cheap/free electricity for when you need it
- Smart charging — Automate charging during the cheapest windows
That's why BatteryIQ exists: to help you optimise the whole system, not just one piece. Our EV charging guide covers how to get your charging costs as close to $0 as possible.
The Tax Benefit Most People Miss
Since July 2022, electric vehicles have been exempt from Fringe Benefits Tax (FBT) when acquired through a novated lease. This is one of the most significant tax benefits available to Australian employees, yet most people don't know it exists.
What This Means in Plain English
You can pay for your entire EV — purchase price AND running costs — using pre-tax income. No FBT. No GST on the purchase. The higher your income, the more you save.
The Treasurer estimated this saves employees up to $4,700 per year on a $50,000 vehicle. On a $60,000-80,000 EV over a 5-year lease, total savings can reach $15,000-$50,000 depending on your income.
Since mid-2023, over 40% of EV buyers have used salary sacrifice or novated leasing. In 2022, it was just 2%. People are catching on.
How Novated Leasing Works
A novated lease is a three-way agreement between you, your employer, and a finance company:
You Choose a Car
Select any eligible EV under the LCT threshold ($91,387)
Employer Deducts from Salary
Lease payments come from your pre-tax income
You Pay Less Tax
Lower taxable income = less income tax
What's Included
For FBT-exempt EVs, you can salary package:
- The car itself — lease payments from pre-tax income
- Electricity for charging — home or public charging costs
- Registration — annual rego fees
- Insurance — comprehensive cover
- Tyres and servicing — maintenance costs
Essentially, your entire motoring cost comes from pre-tax dollars.
Tax Savings by Salary
The higher your income, the more you save. This is because salary sacrifice reduces your taxable income at your marginal tax rate.
| Gross Salary | Marginal Rate | Annual Tax Savings* | 5-Year Savings |
|---|---|---|---|
| $80,000 | 30% | $3,000 - $4,000 | $15,000 - $20,000 |
| $100,000 | 32.5% | $4,000 - $5,500 | $20,000 - $27,500 |
| $120,000 | 37% | $5,000 - $7,000 | $25,000 - $35,000 |
| $150,000+ | 37% - 45% | $6,000 - $10,000 | $30,000 - $50,000 |
*Based on ~$60,000 EV, 5-year lease, including running costs. Actual savings vary by vehicle, lease terms, and individual circumstances.
Plus: No GST
You also save the 10% GST on the purchase price. On a $60,000 car, that's $5,455 saved immediately.
The Depreciation Myth — Debunked
The #1 objection to EVs: "They depreciate faster than petrol cars."
This is technically true but financially irrelevant when you factor in the total cost of ownership.
The Raw Numbers
| Metric | Petrol Car | Electric Vehicle |
|---|---|---|
| 5-year depreciation | ~46% | ~58% |
| $50,000 car loses | $23,000 | $29,000 |
| Depreciation "penalty" | — | $6,000 more |
Yes, the EV loses $6,000 more in value. But now look at what you save:
What Depreciation Ignores
| Saving | 5-Year Value |
|---|---|
| Tax savings (novated lease, $100k salary) | $20,000 - $27,500 |
| GST saved | $5,455 |
| Fuel savings ($2,500 vs $600/yr) | $9,500 |
| Servicing savings ($500 vs $250/yr) | $1,250 |
| Total 5-year savings | $36,000 - $43,700 |
The Bottom Line
Yes, the EV depreciates $6,000 more. But you save $36,000-$43,700 in tax, fuel, and servicing. The EV novated lease wins by $30,000+ over 5 years.
5-Year Cost: EV Novated Lease vs Petrol Purchase
Let's compare the total cost of ownership over 5 years:
| Factor | Petrol Car (Purchased) | EV (Novated Lease) |
|---|---|---|
| Purchase price | $50,000 | $60,000 |
| GST saved | $0 | -$5,455 |
| Tax savings (5 yrs) | $0 | -$22,000 |
| Effective purchase cost | $50,000 | $32,545 |
| Fuel/charging (5 yrs) | $12,500 | $3,000* |
| Servicing (5 yrs) | $2,500 | $1,250 |
| Depreciation | -$23,000 (46%) | -$34,800 (58%) |
| Resale value | $27,000 | $25,200 |
| Net 5-year cost | $38,000 | $11,595 |
| You Save | — | $26,405 |
Based on $100,000 salary, 5-year lease. Excludes residual payment at end of lease. Your actual savings will vary.
*Charging Costs Can Be $0
The $3,000 charging estimate assumes average electricity rates. With the right energy plan and solar + battery setup, your actual charging cost can be significantly lower — even completely free. See our EV charging optimisation guide to learn how.
FBT Exemption Rules (2025)
Eligible Vehicles
- Battery Electric Vehicles (BEVs) — Tesla, BYD, Hyundai Ioniq 5/6, Kia EV6, etc.
- Hydrogen Fuel Cell Vehicles — Toyota Mirai, Hyundai Nexo
PHEVs: Important Change
From 1 April 2025, Plug-in Hybrid Electric Vehicles (PHEVs) are no longer FBT-exempt. If you ordered/received a PHEV before this date, you're grandfathered for the lease term. New PHEV leases after 1 April 2025 will incur FBT.
Requirements
- Price cap: Vehicle must be under the Luxury Car Tax threshold — $91,387 for FY 2025/26
- First use: Vehicle must be first held and used after 1 July 2022
- Vehicle type: Must be a passenger vehicle (under 1 tonne load capacity, fewer than 9 passengers)
- Employer: Your employer must offer salary packaging (most do)
Popular Eligible Models
Under $60,000
- BYD Atto 3
- MG ZS EV
- BYD Dolphin
- Hyundai Kona Electric
$60,000 - $90,000
- Tesla Model 3
- Tesla Model Y
- Hyundai Ioniq 5/6
- Kia EV6
- Polestar 2
Important Considerations
Reportable Fringe Benefits Amount (RFBA)
Even though the EV is FBT-exempt, the benefit is still reported on your income statement as an RFBA. This doesn't cost you tax, but it may affect:
- HELP/HECS repayment thresholds
- Childcare Subsidy eligibility
- Family Tax Benefits
- Other income-tested government benefits
If you receive income-tested benefits, consult a financial advisor before proceeding.
End of Lease Options
At the end of your lease term, you typically have three options:
- Pay the residual — Buy the car outright (residual is usually 30-40% of purchase price for a 5-year lease)
- Refinance — Take out a new loan for the residual amount
- Hand it back — Return the car to the finance company
Changing Jobs
If you change employers, your novated lease can usually transfer to your new employer (this is the "novation" part). If your new employer doesn't offer salary packaging, you may need to continue payments from post-tax income or exit the lease.
Next Steps
1. Check with your employer
Ask HR if they offer novated leasing. Most medium-to-large employers do. Some use providers like Maxxia, SG Fleet, or LeasePlan.
2. Use a calculator
Get a personalised quote from your employer's novated lease provider, or use online calculators from Maxxia, Novated Lease Australia, or SG Fleet.
3. Consider your home charging setup
An EV pairs perfectly with solar + battery. Charge from excess solar or cheap overnight rates to maximise savings.
Complete Your Home Energy Setup
An EV novated lease is just one part of the picture. Add solar + battery to charge your EV for free and eliminate your electricity bills entirely.
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