What the exemption does
Normally, when your employer provides a car you can use privately, the employer pays fringe benefits tax (FBT). With a novated lease that cost is usually passed on to you. Since 1 July 2022, eligible battery electric and hydrogen cars are exempt, which is why EV novated leases became so popular.
Example: a $60,000 electric SUV
- Base value (cost including GST, excluding rego and stamp duty): $60,000
- Taxable value under the 20% statutory formula: $60,000 × 20% = $12,000
- FBT if it were a petrol car: $12,000 × 2.0802 × 47% = $11,732 a year
- FBT for an eligible EV: $0
One thing still shows up: the reportable fringe benefit on your income statement, $12,000 × 1.8868 = $22,642. You don’t pay income tax on it, but it counts for things like the Medicare levy surcharge, HELP/HECS repayments, Centrelink and child support assessments.
Is my car eligible?
- A battery electric or hydrogen fuel cell car (plug-in hybrids only if the arrangement was committed before 1 April 2025).
- First held and used on or after 1 July 2022.
- Its price at first retail sale is at or below the luxury car tax threshold for fuel-efficient cars in the year it was first sold — $91,387 for 2025-26 and $91,661 for 2026-27.
Proposed changes from 1 April 2027
On 5 May 2026 the Government announced that for new arrangements from 1 April 2027, the full exemption would only apply to EVs valued at $75,000 or less. Dearer EVs (still under the LCT threshold) would get a 25% discount on FBT instead. From 1 April 2029 all eligible EVs would get the 25% discount. Existing leases are not affected. This is not law yet, so treat it as a plan, not a rule.
| Base value | Taxable value | FBT if not exempt | FBT 2026-27 | New arrangement from 1 Apr 2027 (proposed) | Reportable benefit |
|---|---|---|---|---|---|
| $45,000 | $9,000 | $8,799 | $0 (exempt) | still exempt | $16,981 |
| $60,000 | $12,000 | $11,732 | $0 (exempt) | still exempt | $22,642 |
| $75,000 | $15,000 | $14,665 | $0 (exempt) | still exempt | $28,302 |
| $80,000 | $16,000 | $15,643 | $0 (exempt) | 25% off → $11,732 | $30,189 |
| $90,000 | $18,000 | $17,598 | $0 (exempt) | 25% off → $13,199 | $33,962 |
Before you sign a novated lease
- Ask for the full running-cost budget (charging, tyres, insurance, rego) and the residual (balloon) payment.
- Check how the reportable fringe benefit affects your HELP repayments or Medicare levy surcharge.
- If you are close to $75,000 and want to start a new lease after March 2027, the proposed rules may matter.
The calculator sets electricity use to a typical 160 Wh/km at 33c per kWh when you choose “Battery electric”. Enter your own car’s figure and tariff for the logbook part.
FAQ
Is an electric car novated lease still FBT-free in 2026-27?
Yes, for eligible battery electric and hydrogen cars first held and used from 1 July 2022 and priced at or below the fuel-efficient LCT threshold. A $60,000 EV pays $0 FBT instead of about $11,732.
What is the reportable fringe benefit on a $60,000 electric car?
$22,642 a year: the $12,000 taxable value grossed up by 1.8868. It is not taxed, but it counts for the Medicare levy surcharge, HELP repayments and some government payments.
What changes for EVs from 1 April 2027?
Under the proposal announced on 5 May 2026, new arrangements would stay fully exempt only for EVs valued at $75,000 or less; dearer eligible EVs would get a 25% FBT discount. Existing leases are not affected, and the change is not yet law.
Sources (checked 5 November 2026): Income Tax Assessment (Cents per Kilometre Deduction Rate for Car Expenses) Determination 2026, F2026L00785, registered 23 June 2026 (91c for 2026-27); ATO cents per kilometre method page; ATO Depreciating assets guide 2026 (car limit $69,674) and “Car thresholds from 1 July” (9 June 2026: car limit $69,883, LCT fuel-efficient $91,661); ATO Luxury car tax rate and thresholds; ATO FBT rates and thresholds (47%, gross-up 2.0802/1.8868, statutory 20%); Treasury joint media release “Fairer tax treatment to encourage affordable EVs” (5 May 2026) and ATO “Electric car discount” new-legislation page; Green Vehicle Guide (greenvehicleguide.gov.au); Australian Institute of Petroleum weekly prices (week ending 6 September 2026).