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Plug-in Hybrids and FBT After 1 April 2025

Plug-in hybrid cars lost the electric car FBT exemption on 1 April 2025. A PHEV leased from that date is treated like a petrol car: its private use is a car fringe benefit worth 20% of its price each year, and the novated lease runs under the employee contribution method, with part of the cost paid from after-tax pay. A PHEV keeps the exemption only if it was already in exempt private use, or available for it, before 1 April 2025 and a financially binding commitment to keep providing it carries on after that date. Even then the exemption ends with that commitment: at the original end of the lease, at a refinance, or when an option to extend is used. On a $58 000 PHEV with $16 000 of yearly costs, a $95 000 earner saves $6 054 a year while exempt and $1 624 once it ends.

PHEV: what ending the exemption costs you

Lease payments, fuel and charging, servicing, insurance, registration.

Extra cost per year once the exemption ends

$4 429

Saving while exempt (all pre-tax)$6 054
Saving under ECM afterwards$1 624
After-tax contribution under ECM$11 600
Pre-tax deduction under ECM$4 082

Savings compare with paying the same costs from take-home pay. ECM: you pay the taxable value (20% of $58 000) after tax, so the employer owes no FBT.

Your full case: novated lease calculator.

By Radif Partners

Publisher of calculators and practical guides · Finance Enthusiast

Updated for 2026-27 financial year · Last verified 2026-07-01

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Which PHEV leases are still exempt

Both tests must be met. First, the car was used privately, or available for private use, before 1 April 2025, and that use was exempt under the electric car rules then in force (first held and used from 1 July 2022, under the luxury car tax threshold). Second, there is a financially binding commitment to continue providing the car on and after 1 April 2025: a signed novated lease for a fixed term is the usual case.

SituationExempt?
Lease signed in 2024, car driven since, 3-year term to March 2027Yes, until the end of the binding term
Same lease, option to extend 2 years taken in 2027No, from the start of the extension
Lease signed March 2025, car delivered May 2025No, never
Residual refinanced into a new leaseNo, from the new lease
PHEV leased from April 2025 onwardsNo

What the end of the exemption costs

Without the exemption, the car fringe benefit on a $58 000 PHEV is valued at $11 600 a year. Left in place, that would cost your employer $11 341 of FBT, which would be passed back to you. Instead, the provider asks you to pay $11 600 a year from after-tax pay, the employee contribution. FBT falls to nil and your employer, who keeps the GST in your contribution, lowers your pre-tax deduction by the rest.

$95 000 salary, $16 000 of costs a yearWhile exemptAfter the exemption (ECM)
Pre-tax deduction$14 627$4 082
After-tax contribution$0$11 600
Saving against paying it yourself$6 054$1 624
Reportable fringe benefits$21 886$0

One effect goes the other way: once the employee contribution brings the taxable value to nil, nothing is reported on your income statement, so HELP repayment income and the surcharge test go down.

Options when your exempt PHEV lease ends

Keep the lease documents that show when the car was first available to you and the fixed term agreed before 1 April 2025; the employer relies on them to keep applying the exemption.

Charging a PHEV at home

The ATO's home charging shortcut, now 5.47 cents per km, was extended to plug-in hybrids from the FBT year starting 1 April 2024. For a PHEV it covers only the electricity: petrol is costed from receipts as usual. It gives a figure for the electricity when one is needed, for a reimbursement or for the operating cost method.

To run your own figures with the employee contribution method, use the novated lease calculator and choose the petrol, diesel, hybrid or PHEV option.

Sources

Frequently Asked Questions

Are plug-in hybrids still FBT exempt?
Not for new arrangements. From 1 April 2025 a plug-in hybrid is no longer a zero or low emissions vehicle for FBT. The exemption continues only where the car was already in exempt private use, or available for it, before that date and a financially binding commitment to keep providing it continues afterwards. Every other PHEV is taxed like a petrol car.
My PHEV was delivered late, after 1 April 2025. Is it exempt?
No. The ATO is explicit that it has no discretion to extend the date, delivery delays included. Its own example is a three-year novated lease signed for a car due on 28 March 2025 that arrived on 1 May 2025: private use from delivery is not exempt, because the car was neither used nor available before 1 April 2025.
Can I extend my PHEV novated lease and keep the exemption?
Only for the term that was binding before 1 April 2025. An option to extend is not a binding commitment, so the exemption stops at the original end date even if you take up the option. Refinancing the residual into a new lease, changing the car or increasing the term are new commitments and end the exemption from that date.
What happens to my pay when the PHEV exemption ends?
Your provider moves the lease to the employee contribution method. You start paying 20% of the car's price from after-tax pay, $11 600 a year on a $58 000 car, and the pre-tax deduction falls by the GST-exclusive part of that amount. On a $95 000 salary with $16 000 of costs, the yearly saving drops by $4 429.

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