EV Salary Sacrifice & FBT Exemption: How Much Can You Save?
Australia's Electric Car Discount makes battery electric vehicles priced under $91,387 (the 2025-26 luxury car tax threshold for fuel-efficient vehicles) fully exempt from Fringe Benefits Tax when salary sacrificed via a novated lease. Annual savings range from $4,200 (on a $80,000 salary) to $11,400 (on a $200,000 salary). The PHEV exemption ended on 1 April 2025, so only pure BEVs now qualify.
Key Takeaways
- •Battery electric vehicles under $91,387 (2025-26 luxury car tax threshold) are exempt from fringe benefits tax when salary sacrificed.
- •Typical savings are $5,000-$15,000 per year depending on your marginal tax rate and vehicle cost.
- •On a $60,000 EV at a $120,000 salary, you save roughly $12,000/year compared to buying outright.
- •The FBT exemption applies to novated leases for new and demonstrator battery-electric and hydrogen fuel cell vehicles.
- •PHEVs (plug-in hybrids) purchased after 1 April 2025 are no longer eligible for the FBT exemption.
In this guide
How the FBT Exemption Works
Since July 2022, battery-electric vehicles (BEVs) and hydrogen fuel cell vehicles under the luxury car tax threshold ($91,387 for fuel-efficient vehicles in 2025-26) are exempt from fringe benefits tax (FBT) when provided through a salary sacrifice arrangement.
Normally, when your employer provides you with a car (or you salary sacrifice one through a novated lease), the value of that benefit is taxed at 47% via FBT. For a $60,000 car, this FBT would add $10,000-$15,000 per year to the cost. The EV exemption removes this tax entirely.
The practical effect: you pay for your EV lease payments, running costs, insurance, and registration from your pre-tax salary. This reduces your taxable income, and you avoid FBT on top. The combined savings are substantial.
Savings by Income Bracket
Here are worked examples for a $55,000 EV on a 3-year novated lease:
| Annual salary | Marginal tax rate | Annual tax saving | 3-year saving |
|---|---|---|---|
| $80,000 | 32.5% | $6,500 | $19,500 |
| $100,000 | 37% | $8,200 | $24,600 |
| $120,000 | 37% | $10,500 | $31,500 |
| $150,000+ | 45% | $14,000 | $42,000 |
These savings combine the FBT exemption with income tax savings from salary sacrificing the lease payments, insurance, registration, tyres, and maintenance costs. Actual savings depend on your lease terms, residual value, and running costs.
Important: Consult a financial adviser or your novated lease provider for exact calculations based on your situation. These are indicative examples only.
What Vehicles Are Eligible?
Eligible:
- New battery-electric vehicles (BEVs) under $91,387 drive-away
- Demonstrator BEVs under the threshold
- Hydrogen fuel cell vehicles under the threshold
Not eligible:
- Plug-in hybrid vehicles (PHEVs) first used after 1 April 2025
- Vehicles over the $91,387 luxury car tax threshold
- Used EVs (second-hand)
- Conventional hybrid vehicles (HEVs)
Popular FBT-eligible EVs in Australia include: Tesla Model 3, Tesla Model Y, BYD Atto 3, BYD Dolphin, BYD Seal, Kia EV6 (base), Hyundai Ioniq 5 (base), MG4, Volvo EX30, Cupra Born, and GWM Ora. Check current drive-away pricing as it changes.
Getting a Home Charger Installed
Once you have your EV through salary sacrifice, the next step is a home charger. Some novated lease providers include a home charger as part of the lease package (check with yours). Otherwise, a home charger is a separate purchase.
A home EV charger costs $700-$3,000 installed depending on the brand and your electrical setup. This is not covered by the FBT exemption (it is a home improvement, not a vehicle expense), but the charger pays for itself within months through fuel savings.
Get free EV charger quotes from vetted local electricians to find the best price for your situation.
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