Most Australians do not realise their employer could be funding a significant portion of their next electric vehicle. With the current tax incentives available, an EV novated lease in Australia has become one of the most cost-effective ways to upgrade your daily drive. If you have been considering making the switch to electric, understanding how salary packaging works could save you thousands of dollars a year.
How An EV Novated Lease Actually Works
At its core, a novated lease is a three-way agreement between you, your employer, and a finance company. Instead of buying a car with your post-tax income—the money that lands in your bank account after the government has taken its share—your employer pays for the vehicle and its running costs directly from your pre-tax salary.
This arrangement reduces your overall taxable income. Because your taxable income is lower, you pay less income tax throughout the year. When this structure is applied to an eligible electric vehicle, the financial benefits are amplified significantly due to specific government tax exemptions designed to encourage the adoption of cleaner transport.
EV vs Petrol: Side-By-Side Cost Comparison
To illustrate the real-world difference, consider two employees both earning $100,000 per year, each leasing a $55,000 car over three years with 15,000 km driven annually. One chooses an eligible battery electric vehicle; the other chooses an equivalent petrol SUV.
| Cost Factor | EV Novated Lease | Petrol Novated Lease |
|---|---|---|
| Vehicle price | $55,000 | $55,000 |
| Fringe Benefits Tax | Exempt (nil) | Applies — employee makes post-tax contributions to offset |
| Pre-tax salary deduction | Full lease + running costs | Partial — reduced by required post-tax contributions |
| Post-tax contributions required | None | ~$5,000–$7,000 per year |
| Annual fuel / charging cost | ~$600–$900 (home charging) | ~$2,600–$3,200 (petrol at ~$2/L) |
| Annual servicing cost | ~$300–$500 | ~$700–$1,200 |
| Estimated income tax saving (3 yrs) | ~$12,000–$15,000 | ~$3,000–$5,000 |
| Estimated total saving vs buying outright | ~$18,000–$22,000 | ~$4,000–$7,000 |
| GST saving on vehicle + running costs | Yes — 10% across the board | Yes — 10% across the board |
| Total Expected Saving Over 3 Years (EV vs Petrol) | ~$14,000–$18,000 more saved | Baseline |
Indicative figures based on a $100,000 salary, 3-year lease, 15,000 km/year. Individual outcomes vary — get a personalised quote for your exact numbers.
The gap is driven almost entirely by the FBT exemption. Because a petrol car triggers FBT, a large portion of those lease payments must come from your post-tax salary — significantly reducing the tax benefit. With an eligible EV, the entire package stays pre-tax, delivering substantially greater savings over the life of the lease.
The Power Of The FBT Exemption
The biggest financial advantage of an EV novated lease in Australia is the Fringe Benefits Tax (FBT) exemption. Normally, when an employer provides a benefit like a car to an employee, the ATO levies a Fringe Benefits Tax. However, to accelerate the uptake of zero-emission vehicles, the Australian Government introduced a full FBT exemption for eligible electric vehicles.
This exemption means the entire cost of the novated lease, including the finance payments and all bundled running costs, can be deducted from your pre-tax salary without incurring any FBT penalty. This makes leasing an EV substantially cheaper than leasing a traditional petrol or diesel car, and often much more affordable than buying a vehicle outright with cash or a standard car loan.
It is important to note that the government has confirmed a three-phase restructure of this policy. Phase one ensures the full exemption remains in place until the 31st of March 2027. Phase two, beginning in April 2027, will restrict the full exemption to EVs priced under $75,000. Phase three will introduce a 25% discount for all EVs from April 2029. Because existing leases are grandfathered under the rules in place when they are signed, there is a strong incentive to lock in a lease before the thresholds change.
What Is Included In Your Salary Package
One of the most convenient aspects of a novated lease is that it bundles all your vehicle-related expenses into a single, manageable fortnightly or monthly deduction. You do not have to worry about finding the cash for a large annual registration bill or an unexpected set of tyres.
A standard EV novated lease package typically includes the finance cost of the vehicle itself, comprehensive insurance, annual registration, scheduled servicing, replacement tyres, and roadside assistance. Crucially for electric vehicle owners, your charging costs can also be packaged. Whether you charge at public fast-charging stations or plug in at home, these energy costs can be paid for using your pre-tax dollars. Furthermore, you do not pay GST on the purchase price of the vehicle or on these bundled running costs, providing an immediate 10% saving across the board.
The evee Advantage
When you arrange your novated lease through evee’s partnership with Vehicle Solutions, the process is streamlined to ensure you get the best possible deal. The partnership offers a comprehensive, all-inclusive approach to salary packaging, ensuring there are no hidden fees or unexpected out-of-pocket expenses.
Additionally, drivers who organise their novated lease through the evee platform are eligible for an exclusive cashback offer of up to $500. This bonus provides even more value when making the transition to electric driving, helping to offset any initial setup costs or home charging equipment installations.
Summary Of Key Benefits
Transitioning to an electric vehicle through a novated lease offers a unique combination of financial and practical advantages. By paying for the car and its running costs from your pre-tax salary, you immediately reduce your taxable income. The FBT exemption further supercharges these savings, making EVs highly competitive with traditional combustion engine vehicles.
Beyond the tax benefits, the convenience of having registration, insurance, servicing, and charging costs bundled into one predictable payment removes the financial stress of vehicle ownership. With the FBT rules scheduled to change in 2027, the current environment presents an optimal window to maximise your savings on a new electric vehicle.
Ready to see exactly how much you could save? Calculate your payments and savings with a free, no-obligation quote today.
