If you have seen an EV novated lease look dramatically cheaper than paying cash, the FBT exemption is why. It is also the thing with a proposed change on the horizon, so here is what it does and whether the change affects you.
Why EVs are so much cheaper to lease
Normally a novated lease attracts fringe benefits tax, which you cover with a post-tax contribution. Eligible electric vehicles under the luxury car tax threshold are exempt from FBT, so the entire package, finance and running costs, comes out of your pre-tax salary. That is where the big saving comes from, and it is why an EV lease can beat a loan or cash by tens of thousands over the term.
What is proposed to change
There is an exposure draft (not yet law) that would wind the exemption back in steps:
- Up to 1 April 2027: full exemption continues for eligible EVs under the threshold.
- 1 April 2027 to 31 March 2029: full exemption only for EVs priced up to $75,000. EVs from $75,000 up to the luxury car tax threshold move to a 25% FBT discount instead of the full exemption.
- From 1 April 2029: all eligible EVs move to the 25% discount.
Does it actually affect you?
For most people, no, not yet. If the EV is under $75,000, which covers the bulk of the market, nothing changes until 2029, and existing leases are expected to be grandfathered on their current treatment.
It only really matters if you are looking at an EV priced above $75,000 and your lease would run past April 2027. In that case, factor in that the saving may be smaller than a quote assumes. Under $75,000, you can ignore it for now.