Electric Car FBT Exemption and EV Novated Leases

The three conditions, one by one

A zero or low emissions vehicle. FBT law now means a battery electric vehicle or a hydrogen fuel cell electric vehicle, built to carry less than one tonne and fewer than nine passengers. A conventional hybrid that cannot plug in has never qualified. A plug-in hybrid stopped qualifying on 1 April 2025, with a carve-out for leases already running, explained on the PHEV page.

First held and used on or after 1 July 2022. The car must not have been both held and used by anyone before that date. A car ordered in February 2022 and delivered in June 2022 can still qualify if nobody used it before July; a car on the road in May 2022 never will, even after a sale to a new owner.

Under the luxury car tax threshold for fuel-efficient vehicles. The test is the car's value at its first retail sale, GST included, against the threshold of that financial year. Every later sale must also stay under the threshold. Since 1 July 2025 a fuel-efficient car is one that uses no more than 3.5 L/100 km, which every battery electric car meets.

Thresholds by year of first sale

The 2026-27 figure was indexed by a factor of 1.003. A model whose drive-away price sits just under the line can cross it with a few options: the value tested includes accessories fitted at the time of sale but not registration, stamp duty or CTP. A $91 000 car with a $1 000 roof rack fitted by the dealer is over the 2026-27 threshold and can never be exempt.

What the exemption is worth on a $62 000 car

Without the exemption the car fringe benefit would be valued at 20% of $62 000, a taxable value of $12 400. Grossed up at 2.0802 and taxed at 47%, that is $12 123 of FBT a year. Nobody actually pays that: providers switch to the employee contribution method, where you hand over $12 400 a year from after-tax pay instead. The exemption removes both, so the whole cost of the car goes through pre-tax pay.

The novated lease calculator runs the same comparison with your own salary, price, term and running costs.

Exempt but reportable: the catch for HELP and the surcharge

An exempt electric car is still a reportable fringe benefit. Your employer reports the taxable value grossed up at 1.8868: $23 396 for this car. You pay no tax on it, but it is added to your income for the HELP repayment, the Medicare levy surcharge, family payments, child support and the private health insurance rebate. In the example, taxable income after packaging is $94 094; with the reportable amount the HELP repayment goes from $3 685 to $7 194 a year. That cost belongs in the comparison if you carry a student debt. The reportable fringe benefits page runs it on your figures.

Before you sign

• Get the price at first retail sale in writing, including dealer-fitted accessories, and compare it with $91 661.
• Second-hand: ask for the original invoice or compliance documents. The ATO expects the buyer to work out whether the car was ever subject to LCT.
• Plan the residual. Electric car resale values have moved quickly; the balloon is fixed when you sign. See residual values.
• Keep the review in mind. The exemption is due to be reviewed by mid-2027. A change would apply from a future date set by law.