What is a novated lease in Australia?

A novated lease is a three-way agreement between you, your employer, and a finance company. Your employer makes car lease payments from your pre-tax salary, reducing your taxable income. The lease covers the car purchase price and can include running costs like fuel, insurance, registration, servicing, and tyres.

Are electric vehicles FBT exempt on a novated lease?

Yes, electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs) with a value at or below $91,387 (the luxury car tax limit for fuel-efficient vehicles) are exempt from Fringe Benefits Tax until 31 March 2027. This makes EVs significantly cheaper to salary sacrifice than petrol or diesel cars.

How much can I save with a novated lease?

Savings depend on your salary, the car price, and whether it's an EV. On an $85,000 salary with a $45,000 EV, you could save $10,000-$15,000 over a 3-year lease through GST savings, reduced income tax, and $0 FBT. Higher income earners in higher tax brackets save more.

What happens to a novated lease if I change jobs?

If you change jobs, your novated lease can be transferred to your new employer (novated again). If your new employer doesn't offer novated leasing, you can make the payments yourself until you find an employer that does, or pay out the lease early.

What is the GST saving on a novated lease?

When you buy a car through a novated lease, you don't pay GST on the purchase price or running costs. On a $50,000 car, that's approximately $4,545 in GST savings alone. This is because the finance company claims the GST input credit.

Novated Lease Calculator

Calculate your novated lease savings including GST, income tax, and FBT. Compare EV vs petrol costs with 2025-26 tax rates.

Last verified: 5 May 2026

How much can a novated lease save me in Australia?

A novated lease bundles car payments and running costs into pre-tax salary sacrifice. You save through: no GST on the purchase price or running costs (~10% saving), reduced income tax (sacrificed amount taxed at 15% instead of your marginal rate), and — for eligible EVs under $91,387 — a full FBT exemption until 31 March 2027. Source: Australian Taxation Office.

Worked example. $90,000 salary leasing a $55,000 EV over 5 years: GST savings ~$5,000 on purchase + ~$2,000 on running costs. Income tax saving on ~$18,000/year sacrifice at 30% MTR → ~$2,700/year. Total 5-year saving ~$20,000-$25,000 vs financing the same car. A $45,000 petrol car on the same salary with 20% statutory FBT saves much less — usually $5,000-$8,000.

Novated Lease by Car Model

Electric Vehicles (FBT Exempt)

Tesla Model 3 Tesla Model Y BYD Atto 3 BYD Seal BYD Dolphin BYD Shark 6 MG ZS EV MG 4 EV Volvo EX30 Volvo XC40 EV Hyundai Ioniq 5 Hyundai Ioniq 6 Hyundai Kona EV Kia EV6 Kia EV9 Kia Niro EV Polestar 2 Cupra Born GWM Ora

ICE & PHEV

Toyota RAV4 Toyota Corolla Cross Mazda CX-5 Ford Ranger Mitsubishi Outlander PHEV BYD Tang

Novated Lease Savings by Salary

$50K salary $55K salary $60K salary $65K salary $70K salary $75K salary $80K salary $85K salary $90K salary $95K salary $100K salary $110K salary $120K salary $130K salary $140K salary $150K salary $175K salary $200K salary

Guides & Comparisons

EV vs Petrol Novated Lease Buying vs Novated Lease BYD vs Tesla Novated Lease Cheapest EV Novated Lease Best EV Under $50,000 Best EV Under $40,000 Novated Lease vs Car Loan Salary Sacrifice a Car How a Novated Lease Works FBT Exemption for EVs

Sourced from

2 primary sources

ATO-Novated-Lease-FBT-ExemptionATO Guidance + Treasury Laws Amendment
Electric vehicle FBT exemption (Treasury Laws Amendment Act 2022)
Eligible zero/low-emission cars under the luxury car tax fuel-efficient threshold are exempt from Fringe Benefits Tax when provided via novated lease. Plug-in hybrid eligibility ended 1 April 2025.
ATO-FBT-Statutory-FormulaATO Guidance + s 9 FBTAA 1986
Car FBT — statutory formula method
Default car-fringe-benefit value: 20% of the car's base value, regardless of distance. Used by virtually all novated leases unless the operating cost method beats it.

General information and estimates only — not financial, tax, or legal advice. Always verify with a licensed adviser or the ATO.

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Take-Home Pay Impact →

See how a novated lease changes your after-tax take-home pay each fortnight.