Australians with a savvy accountant and a progressive workplace could get a $6000 a year benefit if they choose an electric vehicle (EV), according to a breakdown from novated leasing company Inside Edge.
The savings are a combination of the government’s new fringe benefit tax exemption for eligible battery electric (BEV), hybrid and plug-in hybrids (PHEVs) – which passed through parliament on Monday – and a novated lease.
“In real terms while an employee purchasing an internal combustion engine car under a novated lease with a purchase price of $74,000 will benefit approximately $3,800 per year, a PHEV or BEV with a purchase price of $74,000 will now benefit by approximately $9,800 per year, making the choice very straight forward,” says Inside Edge director Andrew Kerr.
He says that calculation is made using a salary of $95,000 and is the maximum benefit an employee can get through the new fringe benefit exemption, which applies to EVs that cost less than $84,916.
MG EV as cheap as a Mazda 3
For more affordable cars the changes begin to be even more dramatic.
On a salary of $85,000, the tax exemption means a monthly lease for a $46,000 MG ZS SUV costs the same as a $28,000 Mazda 3 over a three year lease. The reduction in monthly take-home pay for both vehicles is just over $930.
The government cut a deal with the Greens and senator David Pocock last week to remove hybrids and PHEVs from the exemption from mid-2025, as a way to start phasing out incentives for fossil fuel-reliant vehicles.
A novated lease allows an employee to lease a new car for personal use but pay for the repayments with pre-tax salary, reducing taxable income. Although the practice does not cost the employer, it does count as a fringe benefit or an in-kind payment to an employee which incurs fringe benefit tax — but no longer for eligible EVs.
Kerr says the $9,800 figure is for a Tesla Model Y, as that is one of the most expensive EVs available under the new FBT limit, and is the maximum benefit available. The reduction in monthly take-home pay is $1360, compared to $1860 before the FBT changes.
Top saving is $10,000
“The most you can get is a $10,000 saving by buying the most expensive car, but of course you’re outlaying more for it.”
It’s not yet clear whether installing a home charging station will count as an FBT-free expense, but Kerr says interest in EVs is three-times higher in the last six weeks than usual.
Furthermore, he says this will boost the numbers of second hand EVs entering the market as vehicles roll off one to three year leases.
Kerr says already he’s seeing supply chains for cars like Teslas open up, with months long wait times now cancelled and cars coming through.
“I don’t think it’s related to the FBT exemption. I think it’s just production levels have made it easier. The problems that we experienced after COVID are settling down a little bit now,” he said.