How Does EV Novated Lease Work?
An EV novated lease offers an effective way to finance an electric vehicle while gaining access to substantial tax benefits and streamlined budgeting. Here’s how the process works and why it’s a smart choice for many Australian drivers considering EV ownership.
How It Works
Agreement Structure: An EV novated lease is a three-way arrangement between the employee, the employer, and a leasing company. The employer agrees to make lease payments on the employee’s behalf by deducting them from the employee’s pre-tax salary, reducing the employee's taxable income in the process.
Payment Deductions: Lease payments are taken from your gross salary, so they’re deducted before tax is calculated, lowering your taxable income and potentially saving thousands each year.
Bundled Costs: With an EV novated lease, costs like insurance, registration, maintenance, charging, and roadside assistance can be bundled into a single payment, which simplifies budgeting. Instead of managing these expenses separately, the lease handles it all under one payment.
Fringe Benefits Tax (FBT) Exemption: For eligible electric vehicles and plug-in hybrids valued under $91,387 (2024/25 luxury car tax threshold), there’s an FBT exemption, which means no additional tax on the benefits provided by the lease. This exemption can make EV leasing even more affordable.
Lease Duration and End-of-Lease Options: Lease terms generally range from 1 to 5 years, after which you’ll have options to either pay a residual amount to own the car, extend the lease, or trade in the vehicle for a new lease.
Financial Benefits
Tax Savings: By using pre-tax income for the lease, employees can save considerably on tax. Lower Running Costs: Electric vehicles are typically cheaper to run than conventional cars, thanks to lower charging and maintenance expenses. These savings, combined with the tax benefits, can make an EV novated lease more affordable than purchasing outright.
Is an EV Novated Lease Right for You?
For Australians looking to drive an electric vehicle, an EV novated lease combines cost savings, tax benefits, and convenient budgeting. If you’re considering an EV, exploring novated leasing options can help you enjoy lower upfront costs and simplified management of running expenses.
Ready to explore your EV novated lease options? Connect with a novated leasing specialist to see how much you could save.