For Australian drivers, the “Electric Car Discount” has been the single greatest catalyst for EV adoption in our nation’s automotive history. The federal government’s Fringe Benefits Tax (FBT) exemption has effectively turned the luxury of a new Tesla Model 3 or BYD Seal into a surprisingly affordable reality for thousands of salary earners.

On paper, it looks like a financial miracle: pay for your car and its running costs completely from your pre-tax salary, potentially saving you thousands of dollars a year. It sounds too good to be true. And while it is a fantastic deal, it is not without its hidden traps.

Before you sign on the dotted line for that shiny new electric SUV, you need to understand the fine print that the brochures often gloss over. At EV Evolution, Australia’s premier digital platform for EV enthusiasts, we believe in empowering you with the full picture—not just the sales pitch.

Here is the “true advice” you need to know before locking in a novated lease for 2025 and beyond.

The “Free Lunch”: Why Everyone Is Doing It

First, let’s confirm why this is such a hot topic. Under the current legislation, if you take out a novated lease on an eligible Electric Vehicle (EV) or Fuel Cell Electric Vehicle (FCEV), you are exempt from paying the 47% Fringe Benefits Tax that usually applies to private use of a work car.

The Eligibility Checklist for 2025/26:

• The Vehicle: Must be a Battery Electric Vehicle (BEV) or Hydrogen FCEV. (Note: Plug-in Hybrids are largely excluded for new leases as of 1 April 2025).
• The Price: The car’s value must be below the Luxury Car Tax (LCT) threshold for fuel-efficient vehicles. For the 2025-26 financial year, this stands at $91,387.
• The Timing: The car must have been first held and used after 1 July 2022.

If you meet these criteria, you pay for the lease payments, electricity, tyres, insurance, and rego all from your pre-tax income. For someone on the top marginal tax rate, this is essentially a 47% discount on the cost of motoring.

The “Invisible” Trap: Reportable Fringe Benefits

Here is the critical detail that catches many Aussie families off guard. Just because your EV is exempt from FBT liability (meaning you don’t pay the tax), it does not mean the benefit is invisible to the ATO.

The value of your “free” car is still recorded as a Reportable Fringe Benefit Amount (RFBA) on your income statement. While this amount is not included in your taxable income (so you won’t pay income tax on it), it is used to calculate your “adjusted taxable income.”

Why does this matter?

Boosting your adjusted income can trigger a domino effect on other government payments and liabilities:

1. HECS/HELP Debt: It can push you into a higher repayment bracket, unexpectedly reducing your monthly take-home pay.
2. Medicare Levy Surcharge: It could push your income over the threshold, making you liable for the surcharge if you don’t have private health insurance.
3. Child Care Subsidy (CCS): A higher adjusted income could reduce the percentage of subsidy you are entitled to, increasing your daycare fees.

The “True Advice” Calculation:

Let’s say you lease a Tesla Model Y RWD valued at $60,000.

The ATO calculates the “taxable value” using the statutory formula (usually 20% of the car’s base value).

• Statutory Value: $60,000 x 20% = $12,000.
• Gross-Up: This value is then “grossed up” by the Type 2 rate (1.8868).
• Reportable Amount: $12,000 x 1.8868 = $22,641.

This means $22,641 will be added to your income for the purpose of means-testing. If you are on the borderline for HECS repayments or childcare subsidies, this “phantom income” could cost you thousands. Check this with your accountant before signing.

The Home Charging Bonus: 4.2 Cents Per Km

One of the most common questions we get at EV Evolution is: “How do I claim the electricity I use at home?”

Leasing companies have made this easier. For the 2025-26 income year, the ATO allows a “cents per kilometre” rate of 4.20 cents/km for home charging.

If you drive 15,000km a year, you can claim $630 tax-free from your salary package to cover your home electricity bill. It’s not a fortune, but it’s essentially free money for energy you were going to use anyway. To claim this, you simply need to keep a log of your odometer readings.

State Rebates: The Party is Mostly Over

A few years ago, state governments were throwing $3,000 cheques at new EV buyers. In 2025, that landscape has shifted. Most direct purchase rebates in Victoria, NSW, and South Australia have ended, with governments pivoting to infrastructure investment instead.

However, the federal FBT exemption remains the “big kahuna” of incentives. It is worth far more over a 3-5 year lease than a one-off $3,000 rebate ever was. Don’t let the lack of a state rebate discourage you; the federal tax saving is where the real value lies.

Join the EV Evolution

Navigating the world of novated leasing, FBT thresholds, and EV specs can be overwhelming. But you don’t have to do it alone.

EV Evolution is more than just a news site; we are a community dedicated to the Australian electric journey. Whether you are trying to figure out if the new Zeekr 009 fits under the LCT threshold, or comparing the real-world range of the Polestar 4 versus the Tesla Model Y, we have the tools you need.

Need an instant answer?

We encourage you to try chatting with our EV Evolution AI chatbot. It is trained on the latest Australian EV data, tax thresholds, and model release dates.

• “What is the FBT threshold for 2025?”
• “Which electric SUVs have a boot bigger than 500L and cost under $91k?”
• “Is the BYD Sealion 7 eligible for a novated lease?”

Stop guessing and start planning. Visit EV Evolution today to chat with our AI, explore our latest deep-dive reviews, and join thousands of other Aussies making the smart switch to electric.

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.