Australia’s electric vehicle market has evolved quickly, and 2026 looks set to be another landmark year. As more employees switch to EVs, the EV FBT Exemption remains one of the most powerful incentives available through salary packaging.
Understanding how the exemption works, who qualifies, and how it interacts with novated leasing can make a big difference in how much you save.
What the EV FBT Exemption Means
The FBT Exemption removes fringe benefits tax from eligible electric and plug-in hybrid vehicles that are financed through a novated lease for EV or provided by an employer. It effectively makes EVs cheaper for employees and simpler for employers to offer.
Under normal circumstances, employers would pay fringe benefits tax on the value of a company car. The EV exemption eliminates that cost, which means lower lease payments and greater after-tax savings.
For employees, this means you can drive a new electric car through EV novated leasing and have your repayments deducted from your pre-tax income. Over time, those savings can be substantial.
Who Qualifies in 2026
Eligibility remains straightforward but specific:
- The vehicle must be an eligible zero or low-emission vehicle.
- The car’s value must be below the luxury car tax limit for fuel-efficient vehicles.
- It must be leased or provided primarily for personal use through a novated lease arrangement.
If you are considering an EV novated lease, it’s worth checking the price cap, as it changes annually. The 2026 limit sits around $89,000, meaning popular models from Tesla, BYD, MG, and Hyundai may qualify.
To see if you and your vehicle fit the criteria, you can review Fingo’s Novated Lease Eligibility Guide.
Why It Matters for Employees
The combination of an EV FBT exemption and a novated lease FBT structure creates significant financial advantages. Employees can salary package lease payments, insurance, and running costs using pre-tax income, reducing their taxable earnings.
The result is not just savings at tax time but consistent, predictable monthly costs. Employees in cities like Sydney, Melbourne, and Brisbane are finding that EV novated leasing offers a more affordable path to driving new electric vehicles than traditional loans.
If you’re curious about the numbers, use the Novated Lease Calculator to compare pre-tax and post-tax repayments. It’s one of the simplest ways to understand how novated leasing works for an EV.
The Environmental and Business Benefits
The government introduced the exemption to accelerate Australia’s transition to cleaner transport. Businesses are increasingly using EV novated leasing programs to reduce fleet emissions while offering employees valuable benefits.
Fleet managers now see EVs as practical, not experimental. They appreciate predictable running costs, no fuel expenses, and long-term savings on servicing. For employees, salary packaging an EV provides all those advantages plus significant tax relief.
If you want to understand the broader policy, Fingo’s resources on the FBT exemption explain how both employees and employers can benefit under the current rules.
Planning Ahead
While the EV FBT Exemption continues in 2026, it’s essential to stay informed as government thresholds and qualifying vehicle lists evolve. Leases already in place generally retain their tax benefits for the duration of the contract.
Employees interested in electric cars should consider locking in an eligible vehicle sooner rather than later. Knowing what novated leasing is and how a novated lease works gives you the foundation to plan confidently for the future.
Frequently Asked Questions
Who qualifies for the exemption?
The EV FBT exemption applies to employees who salary package eligible electric vehicles through a novated lease and whose cars fall under the fuel-efficient Luxury Car Tax threshold. This means most mainstream electric vehicles qualify, including Tesla Model 3 and Y, BYD Atto 3 and Seal, MG4, Polestar 2 and several Hyundai and Kia EVs. As long as the vehicle is first held and used on or after the applicable start date of the policy and meets the criteria, the exemption applies.
Eligibility also depends on the nature of the vehicle itself. Only battery electric vehicles and hydrogen fuel cell vehicles are included under the exemption. Plug-in hybrids were originally allowed under transitional rules, but these rules are being phased out. For this reason, most PHEVs delivered today do not receive the exemption unless they fall within very specific date-based conditions.
Employee eligibility is typically straightforward. If your employer offers novated leasing as a salary packaging benefit and you receive a taxable salary, you generally qualify. The exemption is applied automatically through the structure of your lease, so there is no additional paperwork required from you.
If you are unsure whether your preferred EV qualifies, Fingo can help you determine eligibility during your leasing quote. You can also refer to the calculator and your employer’s salary packaging policy to confirm whether the exemption applies to your chosen model.
How does novated leasing work
Novated leasing works through a three-way arrangement between you, your employer and the leasing provider. You choose the car you want, and the lease provider purchases it on your behalf. Your employer then deducts the lease payments and running costs directly from your salary using a combination of pre-tax and post-tax income. This structure can reduce your taxable income, improve your cashflow and simplify the way you manage vehicle expenses.
One of the biggest advantages of novated leasing is that running costs like servicing, registration, tyres, insurance and charging can be packaged together into one predictable payment. Instead of paying multiple bills throughout the year, everything is consolidated into your salary deduction. This makes budgeting easier and reduces the financial stress often associated with car ownership.
For EVs, the benefits are even greater because of the FBT exemption. When an EV is exempt from Fringe Benefits Tax, your entire lease cost can be structured more efficiently, often resulting in lower weekly payments compared to financing the same vehicle through a traditional loan. This is why many Australians realise that an EV is actually more affordable under a novated lease than a comparable petrol car.
At the end of the lease, you can choose to return the vehicle, upgrade to a new car, refinance the residual value or purchase the vehicle outright. This flexibility appeals to employees who want to refresh their car every few years without the commitment of long-term ownership.
Can plug-in hybrids still qualify
Plug-in hybrids can only qualify for the FBT exemption under very limited transitional rules that apply to vehicles first held and used before a specific cut-off date. This means that while some early adopters may still enjoy the exemption, most PHEVs purchased or leased today will not receive the same tax benefits. As a result, their packaged cost under a novated lease may be higher than that of a fully electric vehicle that remains exempt.
Although the exemption no longer applies to most PHEVs, many still offer excellent value for drivers who want a combination of electric commuting and petrol-supported long-distance capability. They can still be packaged under a novated lease, but the tax treatment differs due to FBT rules. This means your salary deduction may include both pre-tax and post-tax contributions to offset FBT, unlike with a qualifying EV.
Despite the change in eligibility, PHEVs continue to appeal to drivers who are transitioning toward electric mobility but are not ready to rely entirely on charging infrastructure. They can be ideal for people who drive significant distances or live in areas where public charging options are still expanding.
If you want to compare the cost difference between a PHEV and a fully electric vehicle, the best starting point is the Fingo novated lease calculator. It clearly shows how the exemption impacts EV affordability and how a PHEV sits in comparison.
How can I calculate my savings
The easiest way to calculate your potential savings is by using Fingo’s novated lease calculator, which instantly estimates your pre-tax and post-tax deductions based on your income, vehicle price, running costs and lease term. The calculator also accounts for the EV FBT exemption when applicable, giving you a realistic picture of how much an electric vehicle could cost under salary packaging.
Many drivers compare multiple EV models using the calculator to see how range, vehicle price, battery size and efficiency affect their weekly repayment. Since EV running costs are often significantly lower than petrol costs, the calculator can highlight savings you may not have considered, such as reduced servicing and home charging efficiencies.
You can also adjust variables such as annual kilometres, lease length and optional inclusions to model different financial scenarios. This helps you understand whether a three-year or five-year lease suits your budget better and whether your driving habits increase or reduce potential savings.
Using the calculator before choosing your EV gives you confidence and clarity. Instead of guessing what your packaged repayment might be, you can make an informed decision based on accurate, personalised estimates. This makes it one of the most valuable tools available for Australians considering an electric novated lease.