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Understanding Novated Leasing FBT Exemption For Drivers

Exploring tax benefits and eligibility criteria for novated leasing with FBT exemption.

novated lease fbt

What Is A Novated Lease FBT?

The novated lease FBT exemption is a government-backed scheme that allows employees to lease an eligible electric vehicle (EV) or plug-in hybrid electric vehicle (PHEV) through their employer, without incurring the typical Fringe Benefits Tax. 

This exemption applies to the vehicle’s purchase price, as well as associated running costs such as registration, insurance, maintenance, and even the cost of electricity for charging.

The exemption eliminates the Fringe Benefits Tax liability, resulting in lower overall costs for both employers and employees.

With the exemption covering running costs like registration, insurance, and maintenance, drivers can experience substantial savings throughout the lease term.

By packaging vehicle expenses into pre-tax deductions, the novated lease FBT exemption enhances cash flow management for employees.

Choosing an EV not only reduces your carbon footprint but also aligns with the government’s broader sustainability goals, potentially unlocking additional incentives.

How Does It Works

To qualify for the novated lease FBT exemption, several criteria must be met:

To get a clear estimate of the potential savings and benefits of a novated lease for an EV, use our Novated Leasing Calculator.

Technical & Legal Considerations

Ensure that the chosen EV or PHEV meets the eligibility criteria for the FBT exemption, including vehicle type, first use date, and LCT exemption.

Carefully review the lease agreement terms, including the lease duration, termination clauses, and any potential penalties or fees.

Understand the residual value calculations and your options at the end of the lease term, such as purchasing the vehicle or returning it.

Familiarise yourself with the insurance requirements and ensure adequate coverage is in place for your novated lease vehicle.

Novated Lease FBT: Tax Implications

While the novated lease FBT exemption offers significant tax savings, it’s crucial to understand the broader tax implications for both employers and employees:

  • Employers: By providing FBT-exempt EVs to employees, employers can reduce their overall FBT burden, potentially lowering their payroll tax and WorkCover premiums. However, they must ensure compliance with all relevant regulations and reporting requirements.

Employees: Employees can enjoy substantial income tax savings by packaging vehicle expenses into their pre-tax salary deductions, effectively reducing their taxable income. However, it’s essential to accurately report and account for these benefits to avoid any potential tax liabilities.

It’s highly recommended to seek guidance from experienced tax professionals or novated lease providers to ensure full compliance and maximise the tax benefits associated with the FBT exemption.

Start Your Novated Lease Today

To encourage the adoption of electric vehicles and promote sustainable transportation, various offers and incentives may be available in conjunction with the novated lease FBT exemption: government incentives, employer incentives, and fleet discounts.

Unlock the Power of Tax Savings and Sustainable Commuting Today.

Explore how Novated Lease FBT exemption can revolutionize your daily commute, offering tax benefits and eco-friendly mobility that align with your financial and environmental goals.

Frequently Asked Questions

The Fringe Benefits Tax (FBT) is a tax levied on non-cash benefits provided by employers to their employees, such as company cars or other perks. This exemption allows employees to lease an eligible EV or plug-in hybrid electric vehicle (PHEV) through their employer without incurring the typical FBT, resulting in significant tax savings.

Novated leasing for an EV offers financial savings due to the FBT exemption, reducing overall vehicle ownership costs. Additionally, driving an EV supports environmental benefits and simplifies the ownership experience through comprehensive coverage for various expenses.

Not all electric vehicles qualify for the FBT exemption. Eligible vehicles must be zero-emission or low-emission, meeting specific criteria set by the Australian government. This includes factors like vehicle type, usage start date, and purchase value below the Luxury Car Tax (LCT) threshold.

While there’s flexibility in choosing eligible EV models, availability depends on market conditions and your novated lease provider’s offerings. Collaborate closely with your provider to identify suitable options that align with your needs and qualify for the FBT exemption.Toggle Content

Why choose a novated lease provider for EVs with FBT exemption?

Reputable providers have in-depth knowledge of the FBT exemption regulations and can guide you through the application process, ensuring compliance and maximising potential savings.

Many providers offer tailored packages that include not only the vehicle but also charging solutions, insurance, maintenance, and other related services, providing a seamless ownership experience.

Novated lease providers can offer ongoing support throughout the lease term, keeping you informed about any legislative changes or updates that may impact your FBT exemption status.