How the EV exemption works
Eligible zero or low emission cars, which means battery electric and hydrogen fuel cell vehicles, are exempt from fringe benefits tax when they were first held and used on or after 1 July 2022 and their value is below the luxury car tax threshold for fuel-efficient vehicles (set at $91,387 for 2025–26). Because there is no FBT, your employer does not need an after-tax employee contribution to offset it.
Plug-in hybrids
The exemption for plug-in hybrid electric vehicles ended on 1 April 2025, except for arrangements that were already in place before that date. New plug-in hybrid leases are generally treated like petrol and diesel cars.
How petrol and diesel cars compare
For non-exempt cars the statutory formula treats 20% of the car's base value as the taxable benefit each year. Most providers arrange an employee contribution (ECM) paid from after-tax pay to reduce the FBT to nil, with the remainder of the costs paid pre-tax. The tax saving is therefore smaller than for an eligible EV.
What counts toward the lease?
Lease payments, charging or fuel, insurance, registration, servicing and tyres can all be paid from pre-tax salary through the lease. Try our novated lease calculator to estimate the saving.
Other things to know
An exempt EV benefit still counts toward your reportable fringe benefits amount. A novated lease also usually involves a residual payment at the end of the lease, finance costs and a provider fee, all of which reduce the net advantage. Compare quotes and read the terms before you sign.