Why A Novated Lease Makes Your Next EV More Affordable
Most Australians don’t realise their employer could be funding a significant portion of their next electric vehicle. By using a salary packaging arrangement, an EV novated lease in Australia allows you to pay for your car and all its running costs using your pre-tax income, delivering thousands of dollars in tax savings every year.
If you have been weighing up whether to buy an electric vehicle outright, take out a standard car loan, or explore salary packaging, understanding the financial mechanics of a novated lease is essential. Thanks to targeted government incentives, it is currently one of the most cost-effective ways to drive a new EV.
The Power Of Pre-Tax Salary Deductions
The core financial advantage of a novated lease lies in how the payments are structured. Instead of receiving your full salary, paying income tax, and then using what is left in your bank account to pay for a car loan, a novated lease reverses the process.
Your employer deducts your lease payments and estimated vehicle running costs directly from your gross salary before income tax is calculated. Because your taxable income is reduced, you pay less income tax to the Australian Taxation Office (ATO) throughout the year. The higher your marginal tax rate, the greater your potential savings.
This arrangement also bundles all your car-related expenses—including comprehensive insurance, registration, servicing, replacement tyres, and even public charging costs—into one predictable, pre-tax fortnightly payment. You are no longer hit with large, unexpected bills when your registration or insurance is due.
The EV Fringe Benefits Tax (FBT) Exemption
Normally, when an employer provides a benefit like a car to an employee, the ATO applies a Fringe Benefits Tax (FBT). For traditional petrol or diesel vehicles, this tax significantly eats into the pre-tax savings of a novated lease, requiring the employee to make post-tax contributions to offset the liability.
However, to accelerate the transition to zero-emission transport, the Australian Government introduced a full FBT exemption for eligible electric vehicles. This policy is the single biggest reason why an EV novated lease is so financially attractive. It means the entire cost of the vehicle and its running expenses can be packaged pre-tax without triggering any FBT penalty.
It is important to note that the government has confirmed a three-phase restructure of this exemption. 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. Finally, 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.
EV vs Petrol: The Real-World Cost Difference
To understand just how much the FBT exemption changes the equation, it helps to look at a side-by-side comparison. Consider two employees, both earning $100,000 per year, who each decide to lease a $55,000 vehicle over three years, driving 15,000 kilometres annually. One chooses an eligible battery electric vehicle, while the other opts for a petrol equivalent.
| 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.
As the table shows, the absence of FBT on the electric vehicle means the employee’s entire lease package remains pre-tax, delivering substantially greater income tax savings over the life of the lease. For a deeper dive into the mechanics of this arrangement, you can read The Complete Guide To EV Novated Leasing In Australia.
Upfront GST Savings On Your Purchase
Beyond income tax reductions, an EV novated lease benefits Australia drivers by removing the Goods and Services Tax (GST) from the initial purchase price of the car. When your novated lease provider acquires the vehicle on your behalf, they do so as a business transaction, allowing them to claim back the GST.
This saving is passed directly on to you, effectively discounting the car’s price by up to 10% before your lease even begins. Furthermore, you do not pay GST on any of the packaged running costs throughout the lease term, such as servicing, tyres, and insurance, adding another layer of ongoing financial benefit.
Maximising Your Novated Lease Benefits
When you combine the pre-tax salary deductions, the FBT exemption, the upfront GST discount, and the lower day-to-term running costs of an electric vehicle, the financial case for a novated lease is compelling. For many Australians, it transforms premium electric vehicles that might have seemed out of reach into highly affordable daily drivers.
Through the evee x Vehicle Solutions partnership, transitioning to an electric vehicle via a novated lease is simpler than ever. Our dedicated partners handle the vehicle sourcing, finance approval, and employer setup, while also offering an exclusive $500 cashback for evee customers.
Ready to see how much you could save? Get a free, no-obligation quote via evee today.
