State EV Road Taxes: The Policy That Could Backfire on EV Drivers
Tesla and Hyundai are pushing back on state-based EV road taxes, warning of perverse outcomes. Here's what it means if you're considering a novated lease on an EV.
A new row has broken out between EV manufacturers and state governments over proposed road-use taxes targeting electric vehicles. According to a report by The Driven [Source 1], both Tesla and Hyundai are arguing that a state-based EV tax would create a perverse outcome — one where electric car owners effectively subsidise hybrid vehicle drivers. That's not a rounding error in policy design. That's the policy working exactly backwards.
The argument is straightforward: if a tax is levied specifically on fully electric vehicles but not on hybrids — which still burn petrol — then EV drivers end up cross-subsidising a technology that hasn't fully committed to ditching the pump. For anyone who bought an EV expecting to pay less to run it, that's a significant reversal of the value proposition.
What this means for novated lease customers
If you're using — or considering — a novated lease to get into an EV, this policy debate matters to your bottom line. The FBT exemption for eligible EVs under the federal scheme is currently the biggest financial lever in play. But running costs, including any state-imposed road-use charges, sit outside that federal exemption and would still fall on you as the driver.
A state-based EV road tax layered on top of your novated lease wouldn't undo the tax advantages of the lease structure itself, but it would chip away at the overall cost-of-ownership benefit that makes EVs attractive in the first place. The potential savings from a novated lease on an EV remain real — but the policy environment around EVs is shifting, and not always in the driver's favour. It's worth understanding the full picture before you sign anything.
It's also worth noting that the outcome Tesla and Hyundai are warning about — EV owners subsidising hybrids — cuts against the logic of the federal government's own EV incentive framework. These positions are currently in tension, and how individual states respond will vary. Watch this space.
Common questions
Does a state EV road tax affect the federal FBT exemption on my novated lease?
No — the federal FBT exemption and a state road-use charge operate independently. A state tax wouldn't cancel your FBT exemption, but it would add to your running costs, which affects overall value.
Which states are proposing EV road-use taxes?
The policy landscape varies by state and is actively changing. The Driven's July 2026 report covers the current debate — check the source for the latest positions. We'd recommend not assuming your state won't move on this.
Would a novated lease still be worth it if a state EV tax passes?
For most PAYG employees, yes — the pre-tax salary packaging benefits and FBT exemption on eligible EVs are substantial. But the exact calculus depends on your income, the vehicle, and what your state ultimately does. That's exactly what our advisers model for you.
Why are Tesla and Hyundai opposing the tax if hybrids also pay it eventually?
Their argument, as reported by The Driven [Source 1], is that the current proposed structure exempts or undercharges hybrids relative to full EVs — meaning EV owners bear a disproportionate cost. They're calling that outcome 'perverse,' and it's hard to disagree.
Should I delay getting an EV novated lease until this is resolved?
That's a personal call, but delaying means missing months of potential tax savings in the meantime. Most customers are better served by making a decision based on current confirmed policy rather than waiting on uncertain state-level outcomes.