Novated Lease on an EV in Australia 2026: Complete Guide to Saving Thousands

19 March 2026|8 min read

How to get an electric vehicle on novated lease in Australia 2026 with full FBT exemption. Worked example on an $80K salary with a $45K BYD Atto 3 shows you could save $7,000–$9,000 per year.

What is a novated lease on an EV and why is 2026 the best time?

A novated lease is a three-way agreement between you, your employer, and a finance company. Your employer deducts lease payments and running costs directly from your pre-tax salary, which reduces your taxable income and therefore the amount of income tax you pay. For electric vehicles, the deal got dramatically better in 2022 when the Australian Government introduced a Fringe Benefits Tax (FBT) exemption for eligible electric cars. This exemption means you pay zero FBT on an EV novated lease — a benefit worth thousands of dollars per year that simply does not exist for petrol or diesel vehicles. In 2026, this remains the single largest tax incentive available to Australian employees looking to acquire a new car. The FBT exemption applies to battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) that were first held and used on or after 1 July 2022, provided the car's value at the time of the agreement is below the luxury car tax limit for fuel-efficient vehicles, which sits at $91,387 for the 2025-26 financial year. With the cost of EVs falling significantly — the BYD Dolphin starts under $35,000 driveaway and the Atto 3 sits around $45,000 — a novated lease on an EV is now accessible for the average Australian salary earner, not just high-income executives.

How does the FBT exemption for EVs actually work?

Fringe Benefits Tax is a tax your employer pays when they provide you with benefits on top of your salary — and a car is one of the most common fringe benefits. The FBT rate is 47%, which is calculated on the taxable value of the benefit. For a $45,000 car under a standard novated lease, the FBT could add $8,000 to $12,000 per year in tax — effectively wiping out most of the salary sacrifice savings. The EV FBT exemption eliminates this entirely. When you novated lease an eligible electric vehicle, the FBT liability is zero. This means every dollar of pre-tax salary that goes toward your lease payments and running costs genuinely reduces your taxable income with no offsetting FBT charge. To qualify, the vehicle must be a zero or low-emission vehicle (battery electric or plug-in hybrid with an electric range), the value must be below the fuel-efficient luxury car tax threshold ($91,387 in 2025-26), and the car must not have been previously held or used before 1 July 2022. Most new EVs sold in Australia in 2026 easily meet these criteria. Your employer needs to be willing to offer novated leasing — most medium and large employers do, and many smaller businesses are now set up for it through fleet management companies like SG Fleet, Maxxia, LeasePlan, or SmartGroup.

Worked example: BYD Atto 3 on $80K salary

Let us walk through a real-world example. Assume you earn $80,000 gross salary and want to novated lease a BYD Atto 3 Extended Range with a driveaway price of $45,000 on a 5-year lease term with 15,000 km per year. Your total annual lease and running costs (lease repayment, comprehensive insurance, tyres, servicing, registration, charging costs) come to approximately $12,500 per year or about $1,042 per month. Without a novated lease, you would pay for the car from your after-tax income. On an $80,000 salary, your take-home pay after tax and Medicare levy is approximately $62,580 per year. Buying the car on a standard car loan at 7.5% over 5 years costs about $903 per month in repayments alone, plus running costs of roughly $3,500 per year — a total outlay of around $14,340 per year from after-tax dollars. With the novated lease, the $12,500 annual cost is deducted pre-tax. Your taxable income drops from $80,000 to $67,500, saving you approximately $3,875 in income tax plus $312.50 in Medicare levy — total tax savings of roughly $4,187 per year. On top of this, you save GST on the car purchase price and running costs through the novated lease structure, worth approximately $4,090 over the lease term or about $818 per year. Your total annual savings compared to buying outright with a car loan are approximately $5,005 per year, or $25,025 over the 5-year lease. Even comparing against paying cash for the car, the novated lease saves you $4,187 per year in tax. You can model your own scenario using our Take Home Pay Calculator to see how salary sacrifice affects your net pay.

Who qualifies for an EV novated lease?

To access a novated lease with the FBT exemption, you need to meet several requirements. First, you must be an employee — novated leases are not available to sole traders, contractors on ABNs, or self-employed individuals because the structure requires an employer to make the pre-tax deductions. Second, your employer must agree to offer novated leasing. Most employers with more than 50 staff already have arrangements in place, but even small employers can set up novated leasing through a salary packaging provider at no cost to the business. Third, the vehicle must be eligible for the FBT exemption — it must be a battery electric or plug-in hybrid electric vehicle, priced below the $91,387 fuel-efficient luxury car tax threshold, and first held and used on or after 1 July 2022. Fourth, you generally need to have been in your role for at least 12 months or be on a permanent contract, though some providers accept employees on fixed-term contracts of 12 months or more. Casual employees typically cannot access novated leases. There is no minimum salary requirement, but the savings are proportionally greater at higher marginal tax rates — someone on $90,000 saves more per dollar sacrificed than someone on $50,000 because they are in a higher tax bracket. Use our Tax Calculator to check your current marginal rate.

What happens if you change jobs or leave your employer?

One of the most common concerns about novated leases is what happens if you change jobs. The good news is that the lease is in your name, not your employer's. If you move to a new employer, you can transfer (or novate) the lease to your new employer — they simply take over the pre-tax salary deductions. Most new employers are happy to accept an existing novated lease because it costs them nothing. If your new employer does not offer novated leasing, or if you become self-employed or unemployed, the lease continues but you make the payments yourself from your after-tax income. You lose the salary sacrifice tax benefit during this period, but you still own the car and the lease terms remain the same. You can also choose to pay out the lease early — there may be an early termination fee depending on your provider, but this is typically modest. At the end of the lease term, you have three options: pay the residual value and keep the car outright, re-lease the car for another term (with a new novated lease on the residual amount), or return the car to the leasing company. For EVs with strong resale values, paying the residual and keeping the car is often the best financial outcome.

Top EVs for novated lease in Australia in 2026

The Australian EV market has expanded dramatically, giving novated lease buyers plenty of choice. At the affordable end, the BYD Dolphin (from $33,990 driveaway) and MG4 (from $33,990 driveaway) deliver excellent value with ranges of 340–410 km. The BYD Atto 3 ($44,381–$49,381 driveaway) is the most popular EV on novated lease in Australia, offering a practical SUV body with up to 420 km range. The Tesla Model 3 ($54,900 driveaway for the base model) remains highly sought after for its brand appeal, Supercharger network, and strong resale value. The BYD Seal ($47,888–$55,888) offers a sportier sedan alternative. For those wanting a larger SUV, the Tesla Model Y ($56,530 driveaway) is the best-selling car in Australia full stop, while the BYD Shark 6 ute provides a dual-cab option for tradies and outdoor enthusiasts. All of these vehicles sit well below the $91,387 FBT exemption threshold, making them fully eligible for the tax-free novated lease benefit. At higher budgets, the BMW iX1, Hyundai Ioniq 5, and Kia EV6 all qualify. The key is ensuring the driveaway price at the time of signing is below the threshold.

How to set up an EV novated lease: step-by-step

Setting up a novated lease is straightforward once you understand the process. Step 1: Check with your employer or HR department whether they offer novated leasing — if they do, they will have an approved salary packaging provider. Step 2: Get a quote from the salary packaging provider. You will need to specify the car (make, model, variant), the lease term (typically 1–5 years, with 3 or 5 years being most common), estimated annual kilometres (usually 10,000, 15,000, or 20,000 km), and your gross salary. The provider will produce a quote showing your pre-tax deductions, post-tax deductions (for the employee contribution method used by most providers), and your new estimated take-home pay. Step 3: Compare the novated lease quote against buying the car outright or on a standard car loan. Our Take Home Pay Calculator can help you model the salary sacrifice impact. Step 4: If you proceed, you sign the novated lease agreement, your employer signs the novation deed, and the finance company purchases the car. Step 5: The car is registered in your name, and your employer begins making the salary deductions from your next pay cycle. The whole process typically takes 2–4 weeks from quote to driving away.

Common mistakes to avoid with EV novated leases

While novated leasing an EV is one of the best financial moves available to Australian employees in 2026, there are pitfalls to watch for. First, do not lease a car you cannot afford — the pre-tax savings are real, but you are still committing to payments for 3–5 years. Make sure the monthly deductions leave you with enough take-home pay for your other expenses. Second, be careful with kilometre estimates. If you underestimate your annual kilometres, you will face excess km charges at the end of the lease. If you overestimate significantly, you are overpaying on running costs. Be realistic — check your current driving patterns. Third, compare quotes from multiple salary packaging providers. Fees, interest rates, and included running costs can vary significantly between providers. Some bundle everything (insurance, tyres, servicing, registration, charging) into the lease while others charge separately. Fourth, understand the residual value. At the end of the lease, you will owe a residual — typically 25–35% of the original car price for a 5-year lease. Factor this into your decision. Fifth, if you are close to a tax bracket boundary, salary sacrificing too much can push you into a lower bracket where the marginal benefit reduces. Use our Tax Calculator to model this precisely. Sixth, watch for balloon payment structures that leave you owing a large sum at lease end — a standard novated lease residual is set by ATO guidelines and is manageable, but some arrangements can be structured less favourably.