Thinking about an electric vehicle (EV) on a novated lease? Don’t leave your decision too late.
Right now, eligible EVs don’t attract any Fringe Benefits Tax (FBT). Under draft legislation announced in the 2026/27 Federal Budget, EVs over $75,000 will lose most of this tax benefit for leases starting from 1 April 2027, and all new EV novated leases will follow a couple of years later. Here’s what’s changing and how it could affect your take-home pay.
Leases entered into before 1 April 2027 keep the full FBT exemption, whatever the car’s base value (up to the Luxury Car Tax threshold).
How EV novated leases work today
Since 2022, eligible EVs on a novated lease have been fully exempt from FBT, and this continues until 31 March 2027. That means you can pay for the lease and running costs entirely from your pre-tax salary, with nothing coming out of your take-home pay.
Eligible EV
of the car’s base value paid from your take-home pay each year
Petrol or diesel car
of the car’s base value usually paid from your take-home pay each year to avoid FBT
What changes from 1 April 2027
The current 100% FBT exemption for eligible EVs continues until 31 March 2027. Under draft legislation, the FBT discount will then depend on the car’s value and when the lease is entered into.
| Lease start date | EVs costing $75,000 or less | EVs over $75,000 and below the LCT threshold* |
|---|---|---|
| Before 1 April 2027 | 100% FBT discount | 100% FBT discount |
| 1 April 2027 to 31 March 2029 | 100% FBT discount | 25% FBT discount |
| From 1 April 2029 | 25% FBT discount | 25% FBT discount |
*The Luxury Car Tax (LCT) threshold for fuel-efficient vehicles is $91,661 for 2026/27 and is indexed each July.
Source: ATO – Electric car discount: more sustainable FBT treatment of electric cars
Key points from the draft legislation
Changing your lease means a new lease
If you change the lease length, the final balloon payment or the extras, refinance, or switch employers, your lease will follow whatever rules apply at that time, not the rules you started with.
What the 25% discount means for you
Where the 25% discount applies, employees using the employee contribution method pay 15% of the car’s value post-tax (instead of 20% with full FBT).
The leftover 5% appears on your income statement as a “reportable fringe benefit amount” (RFBA). RFBA doesn’t change income tax, but it may count towards income tests for HECS-HELP repayments, Medicare levy surcharge, Child Care Subsidy and Division 293 tax.
Charge ahead of the 2027 changes
Thinking about going electric? Speak with our team to compare options, get a personalised quote and lock in your timing before 1 April 2027.
Frequently asked questions
Are these changes law yet?
Not yet. The changes are still in draft legislation, so the details could change before they pass. For now, the full FBT exemption still applies to eligible EVs.
We’re watching closely and will update this page as soon as anything is final, so you’ll always know where you stand.
Is the $75,000 limit based on the drive-away price?
Not exactly. The limit is based on the car’s “base value” as defined in the legislation, which isn’t always the same as the drive-away price you see advertised. That means some cars that look like they’re over $75,000 could still come in under the limit.
When we quote, we’ll work out the base value for the exact car you want, so you’ll know before you commit which FBT discount you’ll get.
What if I order my car before 1 April 2027 but it’s delivered after?
Under the draft rules, what matters is when your lease is entered into, not when you order the car. With delivery times on some models stretching out, an order placed in early 2027 might not be enough to secure the current rules.
The safest move is to start early. Talk to us now and we’ll help you choose a car and timeline that gives you the best chance of locking in the full exemption.
Is an EV still worth it on a novated lease after the changes?
For most people, yes. Even with the reduced 25% discount, an eligible EV generally costs you less in tax than a comparable petrol or diesel car on a novated lease. That’s before you count the savings on fuel and servicing.
Everyone’s situation is different, though. We’ll give you a personalised quote showing what your take-home pay could look like, so you can decide with real numbers.