For many Australians, the prospect of owning an Electric Vehicle (EV) is increasingly appealing, driven by rising fuel costs and a desire for cleaner transport. In 2026, the federal government’s Electric Car Discount continues to offer substantial financial benefits, allowing you to save upwards of $15,000 on a new EV through a novated lease arrangement. This guide details how to leverage these significant savings, making EV ownership more accessible and affordable than ever.
What is an EV Novated Lease?
A novated lease is a three-way agreement between you, your employer, and a finance company. It allows you to package your car finance and running costs into your pre-tax salary. For eligible EVs, this arrangement is particularly advantageous due to a Fringe Benefits Tax (FBT) exemption.
The core benefit for EVs is the federal FBT exemption. This means your employer does not pay FBT on the private use of an eligible EV, allowing you to pay for the vehicle and its running costs (like charging, registration, insurance, and maintenance) directly from your pre-tax salary. This significantly reduces your taxable income, leading to considerable income tax savings.
In the first half of 2026, Electric Vehicles (including battery EVs and plug-in hybrids) accounted for 25% of all new-car sales in Australia, demonstrating significant uptake.
How the FBT Exemption Works (and Upcoming Changes)
Under the current Electric Car Discount policy, eligible zero-emission vehicles (Battery Electric Vehicles or BEVs, and Hydrogen Fuel Cell Vehicles or FCEVs) are fully exempt from FBT when provided through a novated lease. This exemption applies if the car was first held and used on or after 1 July 2022, and its value is below the Luxury Car Tax (LCT) threshold for fuel-efficient vehicles.
Important changes are coming to the FBT exemption:
- Until 31 March 2027: The existing 100% FBT discount continues in full for eligible EVs below the LCT threshold.
- 1 April 2027 to 31 March 2029: The full FBT discount will apply only to EVs costing $75,000 or less. EVs costing more than $75,000 but below the LCT threshold will receive a 25% FBT discount.
- From 1 April 2029 onwards: All eligible EVs below the LCT threshold will receive a permanent 25% FBT discount.
Crucially, existing novated leases will not be impacted by these changes. If you enter a lease before March 31, 2027, for an eligible EV, you will retain the full FBT exemption for the life of that lease. This makes 2026 an opportune time to secure maximum savings.
Plug-in Hybrid Electric Vehicles (PHEVs) are no longer eligible for the FBT exemption as of 1 April 2025, unless they were under a pre-existing lease agreement.
What are the Financial Savings?
The savings from an EV novated lease are multi-faceted:
- FBT Exemption: As detailed above, eliminating FBT is the largest saving, potentially saving drivers up to $11,000 per year in tax.
- Income Tax Savings: By paying for your car and its running costs with pre-tax income, your taxable income is reduced, leading to lower income tax payments.
- GST Savings: You don’t pay GST on the purchase price of the vehicle (up to the car limit for GST credit purposes, which for 2026-27 is $69,883) or on the running costs, as these are paid by your employer (the lease provider) who can claim the GST credit. For 2026-27, the maximum GST credit claimable is $6,353 (1/11th of $69,883).
- 0% Import Tariff: Eligible EVs valued below the LCT threshold continue to have the 5% customs duty waived, further reducing the upfront ‘drive-away’ price.
An example calculation from a novated lease provider for a Tesla Model 3 RWD showed total novated lease tax savings of $33,072 over the lease term for a driver in NSW with a $102,000 annual gross salary driving 15,000km per year. While individual savings vary, this illustrates the potential for well over $15,000 in total savings.
Eligible EVs and Price Considerations in 2026
To qualify for the FBT exemption, the EV must be below the Luxury Car Tax (LCT) threshold for fuel-efficient vehicles, which for the 2026-27 financial year is $91,661. Many popular EV models fall comfortably within this limit.
Here are some popular EV models available in Australia in 2026 and their approximate starting prices (before on-road costs, unless specified driveaway):
| Model | Starting Price (AUD) | LCT Threshold Status (2026-27) | Notes |
|---|---|---|---|
| Tesla Model 3 RWD | $45,900 | Well Below ($91,661) | Entry-level model, excellent value. |
| BYD Atto 3 Extended | ~$51,000 (est.) | Well Below ($91,661) | Highly competitive, popular choice. (Price based on 2025, awaiting 2026) |
| Hyundai Kona Electric Extended Range | $47,990 Driveaway | Well Below ($91,661) | Competitive small SUV option. |
| Tesla Model Y RWD | $58,900 | Well Below ($91,661) | Popular mid-size electric SUV. |
| MG ZS EV Long Range | ~$55,000 (est.) | Well Below ($91,661) | Affordable SUV option. (Price based on 2025, awaiting 2026) |
| Kia EV6 Air RWD | $72,660 | Below ($91,661) | Stylish, longer-range option. |
Note: Prices are subject to change and may vary by dealer and region. ‘Driveaway’ prices include on-road costs, making them higher than ‘before on-road costs’ figures. For more affordable EV options, see our guide on Australia’s Cheapest EVs in 2026: 5 Models Under $40,000 to Consider.
State-Specific EV Incentives in 2026
While the FBT exemption is a federal benefit, some states and territories offer additional incentives that can stack with a novated lease. However, many state-based rebates have been wound back in 2024 and 2025.
- New South Wales: The $3,000 EV rebate scheme and stamp duty exemption ended on 1 January 2024. NSW now focuses on charging infrastructure.
- Victoria: EVs are subject to a flat concessional stamp duty rate of $8.40 per $200 of market value, rather than the higher luxury vehicle rate. The $6,000 ZEV Rebate Scheme closed on 2 September 2024.
- Australian Capital Territory: New zero-emissions vehicles are exempt from stamp duty. From 1 July 2024, ZEV owners also benefit from reduced registration fees.
- Queensland: The Zero Emission Vehicle Rebate Scheme ended on 2 September 2024. However, EV and hybrid car owners receive a discount on registration for vehicles with a dutiable value under $100,000.
- Northern Territory: Until July 2027, buyers of new or used EVs receive a $1,500 discount in stamp duty for vehicles with a dutiable value of up to $50,000. New and existing BEVs and PHEVs also receive free registration for the same period.
- South Australia, Western Australia, Tasmania: As of late 2025/early 2026, these states have largely ceased monetary rebates, though some registration discounts may still apply. Western Australia’s $3,500 EV rebate closed on 10 May 2025.
Always check the latest state government websites for the most current information, as policies can change.
Running Costs and Charging Your EV
Beyond the upfront savings, EVs offer lower running costs. Electricity is generally cheaper than petrol, especially if you can charge at home using off-peak tariffs or your own solar power. While public charging networks are expanding rapidly – Australia had 4,268 public charging locations and 11,602 public charging connectors by June 2026 – home charging remains central to cost-effective EV ownership.
Consider integrating your EV charging with your home energy setup. Our guide, Charge Your EV for Under $5: Best Times in Australia 2026 with Solar & Smart Tariffs, provides strategies to minimise charging costs. For longer journeys, understanding Australia’s EV Charging Network 2026: Avoid Range Anxiety & Save Up To 21c/kWh is essential.
Is a Novated Lease Right for You?
An EV novated lease is particularly beneficial for employees whose employers offer salary packaging. It’s a powerful tool to reduce the total cost of EV ownership through significant tax advantages. However, it requires a stable employment situation and careful consideration of the lease terms, including potential balloon payments at the end of the lease.
Bottom Line
For Australian employees considering an Electric Vehicle in 2026, a novated lease presents one of the most compelling financial pathways to ownership. With the full FBT exemption guaranteed until at least March 31, 2027, for eligible models under the LCT threshold of $91,661, the opportunity for savings exceeding $15,000 is real and immediate. By leveraging pre-tax income for vehicle costs and avoiding GST on purchase and running expenses, an EV novated lease can drastically reduce your out-of-pocket expenses, making the transition to electric transport both environmentally and financially rewarding. Act now to secure the maximum benefits before the FBT rules transition in 2027.