Question 1

Which electric vehicles are eligible for the FBT exemption in Australia?

Accepted Answer

Battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) first held or used on or after 1 July 2022, with a drive-away price below the luxury car tax threshold for fuel-efficient vehicles ($89,332 in 2024–25), are eligible. This includes models like the Tesla Model 3, Tesla Model Y (standard range), BYD Atto 3, BYD Seal, Hyundai Ioniq 6, Kia EV6 (base), MG4, and most other mainstream EVs. The Tesla Model S, Model X, and Porsche Taycan typically exceed the LCT threshold and do not qualify.

Question 2

How much can I save with the EV FBT exemption in Australia?

Accepted Answer

Savings depend on your income tax rate and the car's value. For a $65,000 EV on a 3-year novated lease with a 37% marginal tax rate, the total FBT exemption benefit is typically $10,000–$20,000 over the lease term. Higher income earners (45% marginal rate) save more; lower income earners save less. The FBT exemption means all lease payments — including running costs if bundled — come from pre-tax salary, effectively getting a 32–47% discount on the car depending on your tax bracket.

Question 3

Does the FBT exemption affect my Medicare levy or HECS repayments?

Accepted Answer

Yes — this is an important consideration. While no FBT is payable, the car's value is reported as a Reportable Fringe Benefit Amount (RFBA) on your payment summary. The RFBA is included in income tests for Medicare Levy Surcharge, HECS/HELP repayments, family tax benefits, childcare subsidies, and private health insurance rebates. This means your taxable income is reduced (good for income tax) but your total income for means-testing purposes remains elevated (can reduce benefits). Speak to a tax professional to understand your specific situation.

Question 4

Can I get the EV FBT exemption if my employer doesn't offer novated leases?

Accepted Answer

No — the FBT exemption only applies when a car is provided as an employer benefit, typically through a novated lease or company car arrangement. Self-employed individuals and sole traders cannot directly access this exemption for personal use vehicles. However, if you operate a business, there may be separate tax deduction strategies. If your employer doesn't currently offer novated leases, many employers will set up this arrangement on request — it costs them nothing and they benefit from reduced payroll tax.

Question 5

Are plug-in hybrids (PHEVs) still eligible for the FBT exemption?

Accepted Answer

PHEV eligibility has been subject to change. PHEVs were initially included but faced a sunset clause. As of 2025, only PHEVs that were first held under the arrangement before 1 April 2025 retain the exemption for the remainder of that arrangement. New PHEV arrangements from 1 April 2025 onward do not qualify for the FBT exemption — only pure battery electric vehicles (BEVs) do. This policy creates a clear advantage for BEVs over PHEVs for novated lease purposes. Always verify current eligibility with your novated lease provider or the ATO.

Question 6

Is a novated lease always better than buying an EV outright?

Accepted Answer

Not always. The FBT exemption benefit is highest for those on the 37% or 45% marginal tax rate. At lower income levels, the benefit shrinks and a novated lease's fees and interest costs can erode savings. Other factors: novated leases include running costs (rego, insurance, servicing, fuel) in the salary packaging — convenient but requires a residual balloon payment at end. Buying outright avoids interest and fees. A novated lease is generally excellent value for high-income earners on a 3-year term; for lower earners or those who prefer to own outright, the maths may not stack up.

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The EV FBT exemption — Australia's biggest EV incentive