If you have been thinking about starting a novated lease, 2026 may feel like a turning point. Several tax changes, electric vehicle incentives and market trends have reshaped how salary packaging works in Australia.
But the key question remains: is 2026 actually the best year to start a novated lease?
To answer that, you need to look at what has changed over the last few years and how those changes affect car costs today.
The Biggest Change: EV FBT Exemption
One of the most significant developments affecting novated leasing is the Fringe Benefits Tax (FBT) exemption for eligible electric vehicles.
Under this policy, certain EVs leased through salary packaging can avoid FBT entirely. Normally, FBT would apply when an employee receives a car benefit through their employer, which reduces the tax advantage of a novated lease.
However, with the exemption:
- Employees may pay vehicle costs using pre-tax salary
- FBT may not apply to eligible EVs
- Total after-tax costs can be significantly lower
This policy has played a major role in making EV novated leases more attractive in recent years.
Plug-In Hybrid Rules Changed in 2025
Another major update occurred in 2025.
The FBT exemption for plug-in hybrid vehicles (PHEVs) ended on 31 March 2025, meaning new PHEV leases after this date generally no longer qualify for the tax benefit.
What this means for 2026:
- Fully electric vehicles can still qualify for the exemption
- Plug-in hybrids usually do not qualify anymore
- Buyers may shift more strongly toward full EV models
This change has influenced the types of vehicles Australians consider when starting a novated lease.
EV Choice Has Expanded Rapidly
Another reason 2026 feels different is the number of electric vehicles now available.
Australia has seen rapid growth in EV options, with the number of available models increasing dramatically since 2022.
This means buyers now have:
- More affordable EV choices
- More SUV and family vehicle options
- Better range and charging technology
Combined with tax incentives, this expansion has made novated leasing particularly appealing for EV buyers.
Interest Rates Are Still High
Interest rates remain relatively elevated compared with the ultra-low levels seen earlier in the decade.
This matters because traditional car loans can become more expensive when interest rates rise.
With a novated lease:
- payments are structured through payroll
- tax treatment may offset some of the cost
- running costs are often bundled together
For some employees, this structure can make budgeting easier compared with traditional car finance.
What Hasn’t Changed
Despite these new developments, the core structure of novated leasing is still the same.
A novated lease still works by:
- Leasing the vehicle through a finance provider
- Packaging the payments through your employer
- Deducting costs from a mix of pre-tax and post-tax salary
The overall cost still depends on several factors, including:
- your salary
- vehicle price
- lease term
- kilometres driven
- tax bracket
So Is 2026 the Best Time?
For many Australians, 2026 may be one of the most favourable periods to start a novated lease because of:
- EV FBT exemptions
- growing electric vehicle choice
- rising car prices pushing buyers to explore alternative finance structures
However, the best timing always depends on your personal situation.
The smartest approach is to compare scenarios using your salary and vehicle price before making a decision.
Frequently Asked Questions
What is the EV FBT exemption?
The EV FBT exemption allows eligible electric vehicles leased through salary packaging to avoid Fringe Benefits Tax, which can significantly improve the tax efficiency of a novated lease.
Do plug-in hybrids still qualify for FBT exemption?
No. The exemption for plug-in hybrid electric vehicles ended on 31 March 2025 for new leases, although some earlier leases may still retain the benefit.
Is a novated lease better than a car loan in 2026?
It depends on factors such as income level, vehicle price and tax bracket. In some cases, the tax structure of a novated lease can change the total after-tax cost.
Are electric vehicles the best option for novated leasing?
Many employees find EVs attractive under novated leases because of the tax exemption and lower running costs, though eligibility rules apply.
How can I check if a novated lease makes sense for me?
The most reliable way is to compare the numbers using your salary, expected driving distance and vehicle price to see how the structure affects your take-home pay.
