What Is a Novated Lease and How Does It Work?
A novated lease is a salary packaging arrangement involving you, your employer, and the finance company. It allows you to lease a vehicle with repayments made from your pre-tax salary, which can reduce your taxable income and streamline vehicle ownership.
As novated leasing continues to grow in popularity, 2025 brings with it several updates that are worth understanding—particularly around tax treatment, electric vehicle (EV) incentives, and employer adoption.
1. Fringe Benefits Tax (FBT) Exemptions for EVs Continue
One of the most significant drivers of novated leasing in the past couple of years has been the FBT exemption for eligible plug in hybrid electric vehicles (PHEVs) and electric vehicles (EVs). On 1st of April 2025, this exemption ended for PHEVs. However,it still remains in place for qualifying EVs, provided they fall under the relevant price threshold (the luxury car tax limit for fuel-efficient vehicles).
This policy continues to make novated leasing an appealing option for employees considering EVs, especially those seeking to combine environmental benefits with potential cost advantages. The ongoing support from the Australian government reinforces the shift toward more sustainable vehicle options across fleet and individual use.
2. Employer Participation Is Growing
More employers are incorporating novated lease programs as part of their broader employee benefits offerings. In 2025, there’s a notable increase in medium-sized businesses partnering with salary packaging providers, giving employees more options beyond traditional remuneration models.
This shift is driven by:
- FBT Exemption for EVs and PHEVs (before 1st April 2025)
- More employees are demanding for it
- Greater awareness of novated leasing’s flexibility
- Interest in employee wellness and benefits
- Positive feedback from existing lease participants
This trend means more Australian workers now have access to novated lease arrangements through their employer—making the model more mainstream than ever before.
3. EV Availability Is Improving
The Australian market is seeing a growing range of novated lease–friendly electric vehicles, many of which are priced below the FBT exemption threshold. Brands like BYD, MG, Tesla, KIA and Hyundai are regularly releasing new models tailored to meet local demand.
Increased EV supply in 2025, driven by improved import pipelines and dealer inventory, means shorter wait times and broader eligibility for novated lease packaging. This expands choice for drivers looking for low-emission alternatives without compromising on value or features.
4. Enhanced Tools and Tech Integration
Novated lease tools and platforms are becoming more user-friendly and data-driven, allowing employees to compare vehicles, manage running costs, and track lease inclusions with ease. This enhanced visibility helps users make more informed choices aligned with their budgets and preferences.
Employers and salary packaging providers are also streamlining onboarding and approval processes, meaning leases are easier to start and manage digitally.
Important Clarifications
While Fingo assists in content and research related to novated leasing, Fingo is not a finance provider. Any leasing agreements or salary packaging arrangements are handled directly through authorised finance companies and your employer.
2025 is shaping up to be another strong year for novated leasing, with growing employer support, favourable EV incentives, and a larger pool of vehicle options. Whether you’re looking at novated leasing for the first time or considering an upgrade, staying across these trends can help you better evaluate your options.
As always, be sure to review your eligibility and speak with your payroll or salary packaging provider before proceeding.