Electric car novated lease

When the term ends on your EV novated lease, you will have the option to:

• Pay the residual to own the car outright and continue to drive the same vehicle (the novated lease tax benefits will end at this point too)
• Renew your lease for a new term with the same EV or PHEV (continuing the tax benefits)
• Upgrade to a new vehicle by starting a new novated lease agreement

When deciding what lease term is best for you, bear in mind that there are some key dates for the Electric Car Discount policy coming down the track:

• Only leases on PHEVs that commenced before 1 April 2025 will be exempt from FBT. If you extend an existing lease on the same vehicles after this date, this will be considered a new lease and will not be exempt from FBT, according to the ATO.
• The Government has said it is due to review the overall policy by mid 2027.

Your EV novated lease will involve a single regular salary sacrifice car payment made directly from your pre-tax income by your employer. This payment will cover the cost of leasing the car, plus:

• Charging costs
• Comprehensive car insurance
• Vehicle registration
• Servicing
• Tyres
• Car washes
• Charging cable (if required)

If the vehicle you are leasing is eligible for an FBT exemption, your related running costs will also be exempt from FBT, according to the ATO.

You can claim back charging expenses using the Novated Lease Australia driver portal. There are a few ways you can do this:

• If you incurred the expense at a public charger, you can simply upload your receipt and the cost will be refunded to you from your car-running budget.
• If you use a home charger, you can upload a power bill and indicate what portion of the bill is accounted for by charging costs for the vehicle you are leasing.
• Or you can simply claim 4.2 cents per kilometre you drive by uploading a picture of your odometer.

According to the ATO, you cannot cover the cost of a home-charging station for your electric vehicle through a novated lease. Likewise, a replacement battery or car charger that significantly improves the performance of your vehicles cannot be included.

You also cannot cover ongoing costs that are not required to keep your vehicle on the road, including car parking costs, tolls or fines.

Your EV novated lease term can be set for any duration between one and five years. With Novated Lease Australia, even ‘odd’ terms are allowed, i.e. not a full year (e.g. 30 months).

Our consultants can talk you through what your choice of lease term could mean for your costs, as well as any other implications.

This may be possible but will depend on what state or territory you live in and what specific rules and exemptions are applied to the EV incentives available there.

Our expert consultants are located all across Australia and can offer information on what incentives you may be eligible for beyond the novated lease electric car FBT exemption.

The interest rate on your novated lease will depend on a range of factors about you and your financial situation. Broadly speaking, the less risk there is for the finance provider, the lower the interest rate is likely to be. Here are some of the main factors that could influence your rate:

• Your credit score
• What debts you have
• What assets you own (e.g. a home)
• Your employment history
• Your salary and other expenses
• The type and age of car

Having comprehensive car insurance is usually a requirement of the lease agreement. You can choose your own insurance provider (or Novated Lease Australia can help you get a quote for cover) and include the cost of this in your regular, pre-tax lease payment.

There are sometimes other types of insurance offered by lease companies to cover risks that may occur, but in many cases these additional cover types are not necessary and simply add to the cost of your lease.

Yes you can get a novated lease on a mild hybrid (the kind of hybrid car you don’t need to plug in) but this kind of car is not eligible for the fringe benefits tax exemption.

No you can’t package the cost of a home charging system as part of your novated lease. Only the cost of the charging itself (i.e. use of electricity) can be packaged, in addition to other running costs like rego, car insurance and servicing.

Novated leases are generally set up so that there is no direct cost to your employer, even if the lease is liable for FBT. However, an FBT-exempt lease is typically more straightforward for your employer to administer as the entire payment is taken from your salary pre tax. If FBT applies, the lease payment is generally made up of a combination of pre- and post-tax salary.

Not all employers in Australia offer novated leasing as a benefit to employees. If that’s the case, it’s worth asking if your employer would be open to facilitating your lease.

We regularly speak directly to employers to discuss the implications and to answer any of their questions. A lot of employers become open to novated leasing once they understand what’s actually involved (i.e. not much effort for them, but a valuable benefit for their employees).

In short, yes. All novated leases have a residual value, which is the amount required to pay out the lease. Paying the residual means you own the car outright and can either keep it with no further payments, or you can sell it and begin a new lease on a different vehicle.

The residual is a percentage of the car’s purchase price. The longer the lease term, the lower the residual value is, to reflect a greater level of depreciation. The ATO sets the residual levels for all leases.

If you sell your car for more than the residual value, you can keep the profit tax free. If the residual is higher than the amount you sell the car for, you will need to cover the difference.

It’s common for first-time EV drivers, including those taking out a novated lease, to have a degree of range anxiety.

Rest assured, Australia’s charging infrastructure has expanded significantly in recent years and continues to do so at speed. You can view a map of chargers across the country to get an idea of the coverage.

While it’s important to consider your own driving habits, remember that overall the vast majority of EV charging happens at home, or at a workplace while the car is parked for the day.

If you use one of the many public chargers available throughout the country, you can easily claim back the cost through your novated lease.

If you’re concerned about range, our EV leasing experts can explain which models typically perform best for battery range. There’s also the option to consider a plug-in hybrid, which offers a best-of-both-worlds solution, with a battery/petrol engine. Eligible PHEVs are exempt from FBT once the lease commences before 1 April 2025.