Tax and incentive figures current as of August 2026
Thresholds, rebates and rules on this page change each financial year. We check them against the ATO and state revenue offices, but always confirm the current position with the relevant authority before you sign. The $91,661 fuel-efficient LCT cap and the FBT exemption rules set eligibility here, the cap is reindexed every financial year, and the exemption itself starts winding back on 1 April 2027. Confirm current ATO figures before you sign.
With fuel prices high and interest in novated leasing surging, a salary-packaged electric car is one of the smartest money moves available to a lot of Australians right now. The reason is one rule: an EV priced under the luxury car tax fuel-efficient threshold ($91,661 for FY2026-27, up from $91,387) is exempt from Fringe Benefits Tax, which means the whole cost of running it comes out of your pre-tax salary. This guide picks the best cars to put on a novated lease in 2026, ranked on value.
There is also a deadline attached to this now, and it is the single most important thing on this page. The full exemption is being wound back in stages from 1 April 2027, and leases signed before then keep the treatment they started with for the whole term. If an EV is on your list at all, the timing of the signature is worth as much as the choice of car. The section below sets out what changes and when.
The deadline: the FBT exemption winds back from 1 April 2027
The government has announced a phased end to the full FBT exemption on electric cars. It runs in three stages:
- Until 31 March 2027: no change. Any battery-electric car under the fuel-efficient LCT threshold gets the full exemption.
- 1 April 2027 to 31 March 2029: the full exemption applies only to EVs costing $75,000 or less. An EV priced above $75,000 but still under the LCT threshold drops to a 25 per cent FBT discount instead.
- From 1 April 2029: the full exemption is gone. Every eligible EV under the threshold gets the flat 25 per cent discount.
The part that changes what you do about it: existing leases are grandfathered. The treatment that applied when you signed carries through the full term, typically five years, even where the term runs past the cutoff dates. Sign a five-year lease on a $90,000 EV before 1 April 2027 and you hold the full exemption to the end of it. Sign the same lease a month later and the same car is on a 25 per cent discount for five years.
So there are two price lines to think about, not one. $91,661 is the line that decides whether an EV qualifies at all. $75,000 is the line that decides how good the deal still looks in eighteen months. A cheap EV sits under both and is unaffected by any of this.
PHEVs are already out
If you researched novated leases a year ago, update your thinking. Plug-in hybrids lost their FBT exemption on 1 April 2025 (existing leases can ride it out). From that date, only fully battery-electric vehicles under the LCT threshold get the exemption. So while a plug-in hybrid can still be a great cash or loan buy, for a novated lease the smart pick is now an EV. See our full novated lease guide and FBT-exempt cars explainer for the mechanics.
Best value overall: BYD Dolphin / Tesla Model 3
Because the FBT exemption applies to the whole running cost, a cheaper EV means a smaller pre-tax deduction and the strongest percentage saving. The BYD Dolphin is the value sweet spot, a genuinely good small EV at a low lease cost. Step up and the Tesla Model 3 remains the default for a reason: strong range, the Supercharger network and excellent resale, all of which matter at lease-end.
Best family EV for a lease: BYD Sealion 7 / Kia EV5
For a mid-size family SUV, the BYD Sealion 7 packs a big battery and long range for a low lease cost, while the Kia EV5 brings a strong warranty and a polished package. Both sit comfortably under the LCT threshold, so the full FBT exemption applies. The Tesla Model Y is the resale-safe option if your budget stretches.
Best cheap electric SUV to lease: Geely EX5 / Leapmotor B10
Want the lowest possible lease payment on an SUV? The Geely EX5 and Leapmotor B10 are among the cheapest electric SUVs on sale, which translates to small pre-tax deductions and a big proportional saving. See the full ranking in our best EVs under $50k guide.
Best premium EV under the cap: Zeekr 7X
You do not have to go cheap to get the exemption, but at this end of the market the variant matters more than the badge, and the two obvious candidates land on opposite sides of the line.
The Zeekr 7X is the clean pick. It runs from $57,900 to $72,900 before on-roads, so every variant including the Performance AWD sits under the $91,661 cap today and under the $75,000 line that starts mattering on 1 April 2027. You get a premium car without having to think about either threshold.
The Hyundai Ioniq 5 needs more care, and an earlier version of this guide was too loose about it. The Epiq AWD lists at $91,700, which is $39 over the FY2026-27 cap, so on list price alone it does not qualify. The Dynamiq RWD at $76,200 and the Techniq AWD at $78,990 are comfortably under the cap and do qualify today. But all three are above $75,000, so from 1 April 2027 a new lease on any Ioniq 5 drops to the 25 per cent discount rather than the full exemption.
The Epiq is the case worth pausing on. A $39 margin is not a margin. The threshold tests the car's value including dealer delivery and options, so a single option or a mid-year price move settles it either way, and the direction of travel is not in your favour. If you want an Ioniq 5 on a novated lease, the Dynamiq and Techniq are the variants that clear it without an argument.
How to think about the savings
Three things stack in your favour on an EV novated lease: you pay finance and running costs from pre-tax salary, the FBT exemption removes the tax that normally claws that benefit back, and you save the GST on the purchase price up to the claimable limit. The higher your marginal tax rate, the bigger the win. Independent analyses have shown EV novated leases saving higher earners well into five figures versus a car loan over a five-year term. Use our running-cost calculator to compare charging against petrol, and read our methodology for how we treat pricing.
Who it suits, and who it does not
A novated lease is not for everyone. It works best if you are a higher-income earner with a secure job and no plans to switch employers mid-lease. The downsides to weigh: it can reduce your borrowing capacity (relevant if you are buying a home), there are costs if you exit early, and the benefit shrinks at lower tax rates. It is a salary-packaging arrangement, so get advice for your situation before committing.
The bottom line
For the right person, an EV on a novated lease is one of the best-value ways to drive a new car in Australia today. The cheaper the EV, the bigger the proportional saving, so the BYD Dolphin and the value Chinese EVs are the standouts, while the Tesla Model 3 and Model Y add resale security. Keep it under the $91,661 LCT threshold to qualify at all, and if you are looking at something over $75,000, understand that signing before 1 April 2027 is what locks in the full exemption for the life of the lease. Run the numbers for your own income, and browse every EV by price and range in our car directory.