Cars exempt from the fringe benefits tax
Did you know you could save thousands on a novated lease for an electric vehicle?
Did you know you could save thousands on a novated lease for an electric vehicle? Thanks to the Australian Government’s Electric Vehicle Discount Policy, which is designed to help Aussies make the switch to electric, eligible EVs on a novated lease enjoy an exemption from the normal Fringe Benefit Tax (FBT) paid by an employer.
Fringe Benefit Tax, or FBT, is a tax paid by employers on certain benefits they offer to their employees, family or other associates, which is normally set at 47 per cent. Because EVs are exempt from FBT, employees can pay for 100 per cent of the cost of the lease for the vehicle, plus all of its ongoing running costs, from their pre-tax salary.
FBT-Exempt EVs
There are lots of electric vehicles to choose from under the luxury car tax threshold of $91,661 (FY26/27) that are eligible for the FBT exemption. Some of the most popular choices of eligible EVs include:
- Tesla Model Y RWD and Long Range variants
- BYD Sealion 7 Premium and Performance grades
- Geely EX5
- Zeekr X
- Kia EV6 Air and GT Line variants
EV novated leases are FBT-exempt
So, what is a novated lease? Also known as salary sacrifice, they are a popular way for Aussies to access the car they want without having to tie up their money in purchasing and running it.
There are plenty of savings to be had with a novated lease for any vehicle, including saving on the GST for the price of the vehicle and its running costs, and savings at tax time from having lease payments made from the employee’s pre-tax salary.
On top of that, in order to make electric cars more popular, an EV novated lease also qualifies for the Government’s FBT exemption offer, which includes all lease payments, charging-related expenses and running costs – netting even more savings over a non-EV lease.
Is your vehicle eligible to be FBT-exempt?
There are lots of EV models that are exempt from FBT under the Australian Government’s Electric Vehicle Discount Policy, but what you need to ensure is that your chosen vehicle meets the following criteria:
Car is a zero or low emissions vehicle
This includes battery electric and hydrogen fuel cell electric vehicles. Hybrid vehicles are no longer eligible for the FBT exemption.
Below the luxury car tax threshold
As we’ve covered, eligible EVs must cost under the luxury car tax threshold, which is $91,661 in the current 26/27 financial year ($80,809 for all other vehicles). LCT is calculated on the total cost of a new vehicle at the time of its sale, including:
- The price of the car
- GST and any customs duty
- Dealer delivery charges
- Standard and statutory warranties
- Any customisation, such as accessories applied to the car before delivery
However, the LCT threshold doesn’t include:
- Stamp duty
- Transfer fees
- Registration
- Insurance
- Extended warranties
- Service plans
- Modifications for accessibility
Other eligibility criteria
For employees looking to lease a used vehicle, in order to be eligible for the FBT exemption the vehicle in question must have been first held (meaning whenever it was first owned, leased or otherwise made available by another entity) on or after 1 July, 2022.
In addition, the car being leased, whether it is new or used, must be used by a current employee or their associates, such as immediate family members.
Import your car from overseas
In some instances, an employee may want to lease a vehicle that isn’t available in Australia but has been brought in by third party – this is known as a grey import. Grey import vehicles are classified as genuine, legal products that have been brought into a country without the manufacturer’s direct permission.
Some grey import EVs are still eligible for the FBT exemption provided they meet all statutory criteria set by the ATO and can be financed via a novated lease product through Metro. Talk to your employer or a salary packager to find out more.
FAQs
What vehicles don’t qualify for FBT exemption?
Some non-passenger vehicles do not qualify for the FBT exemption. These include:
- All motorcycles and scooters (including electric variants)
- Hybrids vehicles, including both self-charging and plug-in hybrid variants
- Vehicles that carry 9 or more passengers (including the driver)
- Vehicles designed to carry a load of more than one tonne
When will this EV FBT exemption finish?
The government’s FBT exemption on eligible EVs is currently available now for cars used after 1 July 2022. The current exemption offer is applicable until mid-2027, when the government will review this exemption and consider whether it needs to continue to offer it to further incentivise EV take-up in Australia.
What other discounts are there for EV financing?
MetroEco is our suite of dedicated finance products designed to help everyday Aussies make the switch to greener technologies with competitive rates and flexible terms on a range of vehicles, solar and charging products.
Best of all, eligible MetroEco customers also receive a further 0.3% discount off their finance rate when they choose a new EV.
To find out more, contact our team or visit our MetroEco info hub.