There is a strange phenomenon happening in car dealerships across Australia right now. People are walking past $40,000 petrol hatchbacks and driving away in $60,000 electric SUVs—and their weekly budget hasn’t changed by a single cent.
It sounds like magic, or perhaps a scam. It is neither.
It is a government-backed financial “superpower” called the Electric Car Discount, and if you are a salary-earning Australian who is about to sign a standard car loan for a petrol vehicle, you need to stop. Read this first.
At EV Evolution, we don’t just care about the tech; we care about the economics. Today, we are breaking down why the government essentially wants to help pay for your new EV, and how a pricier electric car can actually cost you less than a cheaper petrol one.
The “Secret Sauce”: FBT Exemption Explained Simply
Usually, if your employer gives you a car to drive for personal use (or pays for your car out of your pre-tax salary), the Australian Taxation Office (ATO) views that car as a “perk.” They slap a tax on it called Fringe Benefits Tax (FBT).
Historically, FBT was the “fun police.” It made salary packaging a car complicated and often expensive.
But here is the game-changer:
As of July 2022, the Federal Government removed FBT entirely for eligible Electric Vehicles (EVs) priced below the Luxury Car Tax threshold (currently $91,387 for fuel-efficient vehicles in FY 2025/26).
In simple terms:
- Petrol Car Lease: You pay for the car using a mix of your pre-tax and post-tax money to dodge the FBT tax hit. It’s messy.
- EV Lease: You pay for the entire car and all its running costs using 100% of your pre-tax salary.
This lowers your taxable income significantly. You aren’t just buying a car; you are legally shielding a huge chunk of your salary from the taxman and putting it into your wheels instead.
The Math: $60k EV vs. $40k Petrol Car
This is where the “superpower” kicks in. Let’s look at a typical scenario for an Australian earning $90,000 a year.
The Contenders:
- Petrol Car: A standard SUV (e.g., Toyota RAV4 or Mazda CX-5) costing $40,000.
- Electric Car: A Tesla Model Y or BYD Atto 3 costing $60,000.
On the sticker price, the EV is $20,000 more expensive. You’d assume it costs way more to own, right? Wrong.
The Weekly Take-Home Pay Reality
When you get a standard car loan for the $40k petrol car:
- You pay income tax on your full salary first.
- Then you pay the loan, petrol, insurance, and rego with what’s left (post-tax money).
- Weekly Cost to You: Approx. $280 – $300 (Loan + Fuel + Running Costs).
When you Novated Lease the $60k EV:
- The lease payment and all running costs come out of your pay before tax is calculated.
- Your taxable income drops, so you pay less tax to the ATO.
- Weekly Reduction in Take-Home Pay: Approx. $280 – $310.
The Result:
For roughly the same “hit” to your weekly bank account, you are driving a car that is worth $20,000 more, has better technology, and zero tailpipe emissions.
EV Evolution Insight: You are essentially upgrading from “Economy” to “Business Class” for free, simply because you changed how you paid for the ticket.
It Gets Better: The GST Discount
When you buy a car with cash or a loan, you pay 10% GST. That’s money gone forever.
In a Novated Lease, the financier buys the car (ex-GST) and leases it to you. You generally save the GST on the purchase price (up to a cap). On a $60,000 car, that is nearly $5,500 saved instantly before you even start the engine.
Plus, you save GST on all your running costs during the lease. Every time you change tyres or pay for servicing, you are effectively getting a 10% discount compared to the person paying cash next to you.
The Deadline: Why You Should Act
While the FBT exemption for pure electric cars (BEVs) is legislated to continue until at least mid-2027, the exemption for Plug-in Hybrids (PHEVs) is ending on April 1, 2025.
If you are eyeing a PHEV, the window is closing fast. But for pure EV buyers, the door is wide open—for now. Government incentives don’t last forever. As EV adoption hits targets, these perks will eventually be wound back.
Conclusion: Don’t Sign Until You Check
We are not financial advisors, and everyone’s tax situation is unique. But at EV Evolution, we believe it is financial madness to ignore Novated Leasing if you are a PAYG employee looking at a new car.
The government is currently offering to subsidize your transition to electric driving. They are letting you pay for your car with money that would normally go to the tax office.
Why pay for petrol with your hard-earned, highly-taxed dollars when you could pay for a Tesla with your pre-tax salary?
🤖 Confused by “Pre-Tax” and “FBT”? Let the AI Explain.
Novated leasing can feel like learning a new language. “Residual values,” “Input Tax Credits,” “FBT thresholds”… it’s a lot.
Don’t worry—our AI is trained to translate “Tax Speak” into “Human.”
You can chat with the EV Evolution AI-Powered Chatbot right now to get a simple breakdown tailored to you.
Try asking:
- “Explain FBT exemption to me like I’m a 10-year-old.”
- “What is the estimated weekly cost of a novated lease for a BYD Atto 3 on a $90k salary?”
- “Can I novated lease a used electric car?”
Click the chat icon to start the conversation and see if you can unlock your own financial superpower today.
About EV Evolution
EV Evolution is the leading online platform dedicated to Australian electric vehicle owners and enthusiasts. We foster a vibrant community, delivering essential EV news and insights, and enhancing user engagement through our innovative, AI-powered chatbot for dynamic discussions. Our mission is to empower Australian electric vehicle owners and enthusiasts by fostering a vibrant, AI-driven online community that connects, informs, and advances the nation’s electric vehicle landscape.
