The EV FBT exemption: how does it work and what cars eligible?
Electric vehicles (EVs) are becoming super popular thanks to a 2022 government tax exemption. (Read more here.)
4:30 minute read
Key takeaways
How does the EV FBT exemption in Australia work?
Fringe benefits tax (FBT) is a tax on non-cash benefits you get from your employer that isn’t your regular salary - like an Oly novated lease. That means, depending on how your lease is set up, your employer might need to pay FBT on your novated lease.
Oly helps reduce this risk by using the employee contribution method (ECM), where part of your lease’s operating cost comes out of your after-tax salary. This could help lower or even cancel out the FBT payable at the end of the FBT year (March 31).
Even better, if you're leasing an eligible electric vehicle (EV), the government’s EV Discount makes it FBT-exempt. So, your full lease payment can come from your before-tax salary which could mean even more savings. Win!
How is FBT calculated?
FBT is worked out based on the taxable value of the fringe benefit (and how you calculate it depends on what the benefit is).
Here’s the gist: employers have to self-assess their FBT and work out how much they pay in what’s called a ‘gross-up’ method. In simple terms, the ATO wants to know what salary (at the highest marginal tax rate, Medicare levy included) an employee would need to earn to buy the benefit themselves. That’s the taxable value.
How to take advantage of the FBT exemption with a novated lease
Novated leases are the only way for employees to benefit from the EV Discount. It’s like a financial high-five from the government for choosing an electric car – their way of saying, ‘Thanks for being a cool, eco-friendly driver!’
When you lease an eligible electric car, you unlock the EV Discount (the government incentive that lets you make novated lease payments entirely with before-tax salary). This means, you could lower your taxable income and save thousands in tax over the course of your lease, especially when compared to a petrol car!
How much money the EV FBT exemption could save you?
You could save thousands on an electric car with a novated lease and the zero emission vehicle tax incentives currently in place.
Here’s how it works:
- Let’s say your salary is $90,000 and you have your heart set on a Tesla 3, driving it 15,000 kms a year for five years.
Now, even though the Tesla 3 retails at over $20,000 more than a regular petrol car like the Mazda CX-5, you could still pay a similar amount every week with a novated lease.
Who’s eligible for the EV FBT exemption?
Because the EV Discount is available with a novated lease, you need to be full- or part-time employed and earning a PAYG salary. Traditionally, novated leasing was for employees of government and big corporations. But here’s the good news - Oly brings the big business perks to employees of small and medium businesses too.
Which electric cars are FBT exempt?
Taken out a novated lease on an eligible electric car on or after 1 July 2022? Then it could be FBT exempt. To qualify, EVs need to be under the luxury car tax threshold, which is $91,387 for the 2024/25 financial year.
For FBT-exempt driving, your wheels need to be:
- A zero- or low-emission vehicle
- First held and used after 1 July 2022
- Must be used by a current employee or their associates
- Under the luxury car tax threshold
- Financed with a novated lease
How does the PHEV FBT exemption work?
From 1 April 2025, plug-in hybrid electric vehicles (PHEVs) no longer qualify for the EV FBT exemption.
Which cars don’t qualify for FBT exemption?
Not every set of wheels qualifies for the FBT exemption - here are the ones that miss the mark:
- Conventional petrol or diesel cars (AKA ‘internal combustion engine’ or 'ICE' cars) and hybrids that only use petrol
- Plug-in hybrids (PHEVs) leased after 1 April 2025
- Cars that carry a load over 1 tonne or more than 9 passengers (that’s the weight of a small elephant!)
- Motorcycles and scooters
- Cars first held and used before 1 July 2022
- Cars valued over the luxury car tax threshold
Are EV car expenses and charging costs exempt from FBT under a novated lease?
In short – mostly yes! If your EV qualifies for the FBT exemption under a novated lease, then running costs like charging, rego, insurance, servicing, and even tyres are also FBT-exempt. That means less paperwork and more savings opportunities for you.
For example, you can’t include the cost of buying a fast charger in your lease – only the ongoing energy costs from charging your EV (as long as they’re tracked by a metered charger).
When’s the EV FBT exemption end date?
Great news, there’s currently no expiry date for the EV Discount (and FBT exemption), although a government review is planned for mid-2027.
Get expert help with the EV FBT exemption from Oly
Oly could help you get set up with a novated lease with one regular, automatic payment for your car and most of its expenses. That means you can avoid bill-juggling and late payment fees. Plus, you could have lower running costs over the duration of your lease.
And because Oly’s backed by McMillan Shakespeare Group (MMS), one of Australia’s largest and most trusted novated leasing providers, you could benefit from bigger buying power and over 35 years of experience to get a great deal on your electric car.
Keen to put the pedal down and rev up your savings opportunity on an EV?
Things you need to know
^ Displayed price is available through a novated lease administered by Oly. Estimated costs have been determined based on the following assumptions: 1) The example assumes that the car is an eligible zero or low emissions vehicle, 2) The lease is a Oly fully maintained lease, 3) A 5-year lease term, 4) A residual value of 28.13% of the vehicle purchase price payable at the end of term, 5) Gross annual salary of $90,000, 6) An annual distance travelled of 15,000kms, 7) The value of the car at the first retail sale was below the luxury car tax threshold of $91,387 for fuel efficient vehicles, 8) The car is first held and used on or after 1 July 2022 and 9) The vehicle is purchased in NSW. Government duties and charges may vary the weekly pricing in other states and territories. Additionally, the estimated annual operating costs includes estimates of fuel/electricity, maintenance, four replacement tyres, registration, CTP and comprehensive insurance, roadside assistance, and fleet management fee have been calculated on a GST exclusive basis on the assumption that your employer will be entitled to GST input tax credits and that they will pass on the benefit to you. GST is payable on your ECM contributions. State Stamp Duty rates apply. PAYG tax rates effective 1 July 2024 have been used. The indicative price quoted for the novated lease is based on vehicle quotations received on 1 June 2024 and does not include any optional extras. Any optional extras that you choose will affect the cost of the novated lease and residual value. The novated lease offer is based on the assumption outlined in the comparison table and is an indicative cost approximation of the selected vehicle and model stated and the amounts may change at the time the novated lease quotation is completed and finalised. Your individual circumstances have not been taken into account as this will affect the overall weekly cost amount and the benefits of a novated lease. Savings shown are indicative and reflect estimated tax savings over the full-term of the lease. The total amount saved is a comparison between a novated lease based on the assumption outlined above and the purchase of a vehicle and payment of running and maintenance costs using post-tax earnings. Actual savings will depend on personal circumstances and may vary depending on the vehicle model and price. Oly recommends that you seek independent financial and taxation advice.
This general information doesn’t take your personal circumstances into account. Please consider whether this information is right for you before making a decision and seek professional independent tax and financial advice. Conditions and fees apply, along with credit assessment criteria for lease products. The availability of benefits is subject to your employer’s approval. Oly may pay and/or receive commissions in connection with its services. Actual vehicle prices are based on specific vehicle and accessories, prices and savings may vary based on additional options selected with the vehicle. Oly does not act as your agent or representative in respect of the purchase of any vehicle. Oly does not provide any advice or recommendations in relation to the purchase or lease of any vehicle.
From 1 April 2025, a plug-in hybrid electric vehicle is no longer considered a zero or low emissions vehicle under FBT law. However, your employer can continue to apply the exemption if both the following requirements are met: 1) Use of the plug-in hybrid electric vehicle was exempt before 1 April 2025. 2) You have a financially binding commitment to continue using the vehicle for private use on and after 1 April 2025. For this purpose, any optional extension of the agreement is not considered binding. To qualify for the EV Discount, plug-in hybrid electric vehicles must have been delivered by midnight on 31 March 2025.
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