An EV Might Be More Affordable Than You Think — Here's the Honest Version
Sticker shock putting you off an EV? Before you rule it out, here's what the real cost looks like for Australian PAYG employees using a novated lease. Read on.
A lot of Australians have looked at an electric vehicle, seen the drive-away price, and quietly moved on. That's a completely reasonable reaction. EVs still cost more upfront than comparable petrol cars in most segments — there's no point pretending otherwise.
But the sticker price is arguably the least useful number you can look at when you're a PAYG employee considering a novated lease. According to a June 2025 article by EV Central ([Source 1]), interest in EVs is high but sticker shock remains the primary barrier — and that gap between perception and real cost is exactly where novated leasing does its most useful work.
What this means for novated lease customers
Under the current FBT exemption for eligible electric vehicles, a qualifying EV on a novated lease is paid for entirely from your pre-tax salary — meaning you're not just deferring tax, you're avoiding it on both the lease payments and the running costs (fuel, insurance, registration, servicing, tyres). That changes the affordability maths significantly compared with buying the same car outright or financing it personally.
The exemption applies to battery electric vehicles, hydrogen fuel cell vehicles, and plug-in hybrids that were delivered before 1 April 2025 — the PHEV window has now closed for new arrangements, so if you're looking at a pure EV, you're in the right place at the right time. The policy environment could change — it has before — but right now the settings genuinely favour PAYG employees who want to run a zero-emission vehicle.
None of this means every EV on every salary works out favourably. Your income, the vehicle price, your lease term, and your residual all affect the outcome. That's why we run the numbers properly before recommending anything — not because we're cautious, but because we'd rather tell you it doesn't stack up than sign you into something that doesn't.
Common questions
Which EVs currently qualify for the FBT exemption?
Battery electric vehicles (BEVs) and hydrogen fuel cell vehicles with a base value under the luxury car tax threshold are eligible. PHEVs only qualify if they were first held and used before 1 April 2025 — new PHEV arrangements entered after that date do not qualify for the exemption.
Do I need to be a high income earner for a novated lease on an EV to make sense?
Not necessarily, but your marginal tax rate does affect how much you benefit from paying pre-tax. The higher your rate, the more impactful the savings. Your millarX adviser can model your specific income against the vehicle you're considering.
What running costs are covered under a novated lease?
A fully maintained novated lease bundles the lease payments, fuel or charging costs, insurance, registration, servicing, and tyres — all paid from your pre-tax salary, subject to your employer's salary packaging policy.
What happens if the FBT exemption is removed?
Your lease doesn't disappear — it converts to a standard novated arrangement where some FBT liability may apply, depending on the vehicle's taxable value at that point. We flag this risk upfront because it's real, even if the current policy signals are stable.
Can I choose any electric vehicle, or is the selection limited?
You can novate almost any new EV available in Australia through a franchised dealer, as long as it meets the FBT exemption criteria and is within your employer's approved salary packaging limits.