A novated lease transfers some employee car-lease payment obligations to an employer under a three-party agreement with the lessor. Payroll may fund eligible costs through salary sacrifice, but a car benefit normally attracts fringe-benefits tax (FBT) unless a specific exemption applies. Some arrangements use post-tax employee contributions to reduce the FBT-taxable value. Therefore “every dollar of car cost saves your marginal income-tax rate” is not a valid universal calculation. The ATO employer FBT guide describes lease valuation.
Meena's quote comparison
Meena receives a four-year quote on a A$45,000 car. To judge it, she needs the actual deposit or financed amount, payroll deduction split between pre-tax and post-tax, running-cost budget, lease fees and interest, insurance, GST treatment, end residual and options on leaving her employer. A claim of A$8,849 saved every year or a A$35,400 four-year discount cannot be derived from only her A$95,000 salary and a A$1,400 monthly package cost. Compare the same car, mileage and insurance over the same ownership horizon.
EV exemption has conditions
An eligible battery-electric car first held and used from 1 July 2022 can qualify for an FBT exemption if no luxury-car tax was payable and other conditions are met. The relevant 2026–27 fuel-efficient luxury-car threshold is A$91,661, not the 2025–26 A$91,387 figure. New plug-in-hybrid arrangements generally lost the EV exemption from 1 April 2025, subject to qualifying pre-existing commitments. ATO's EV fact sheet explains both rules; Australian Border Force publishes the 2026–27 threshold.
Exempt does not mean invisible
Even an FBT-exempt EV car benefit can create a reportable fringe-benefits amount that affects means tests. Finance interest, fees, running expenses, employer terms and residual value still exist. A car worth A$60,000 does not automatically “effectively cost A$40,000” because an FBT exemption is a tax treatment, not a guaranteed vehicle-price discount.
