Novated Leasing for Electric Cars: A Complete Guide for Australian Drivers

Novated leasing for electric cars is a popular option for Australian drivers looking to save on the cost of owning and operating an electric vehicle (EV). Through a novated lease, employees can pay for their EV and associated running costs using pre-tax salary contributions, resulting in significant tax savings and lower overall costs compared to paying cash. The Federal Government's recent Electric Car Discount Bill has further enhanced the benefits of novated leasing for EVs by exempting eligible models from fringe benefits tax (FBT) until at least 2027. Additionally, various state-based incentives and rebates are available to support the adoption of EVs in Australia. This comprehensive guide will explore the details of novated leasing for electric cars, including the tax savings, budgeting considerations, and the process of securing a lease.

Key Takeaways

• Novated leasing for electric cars allows you to pay for your vehicle and running costs using pre-tax salary contributions, leading to significant tax savings.
• The Federal Government's Electric Car Discount Bill exempts eligible electric vehicles from fringe benefits tax (FBT) until at least 2027.
• Various state-based incentives and rebates are available to support the adoption of electric vehicles in Australia.
• Novated leasing can help you save thousands of dollars on the cost of owning and operating an electric vehicle.
• It's important to carefully consider your personal circumstances and budget when choosing an electric vehicle and a novated lease.

Novated leasing for electric cars is a financing arrangement that allows Australian employees to pay for their electric vehicle (EV) and associated running costs using pre-tax salary contributions. This process, known as salary sacrificing or salary packaging, is approved by the Australian Taxation Office (ATO) and can result in significant tax savings for the employee.

Salary Sacrificing and Novated Leases Explained

Through a novated lease, your employer agrees to make periodic payments towards the lease of your EV and associated running costs, such as maintenance, insurance, registration, and roadside assistance. These payments are deducted from your pre-tax salary, effectively reducing your taxable income and leading to tax savings on your take-home pay.

Benefits of Novated Leasing for Electric Vehicles

Opting for a novated lease for your electric car offers several benefits, including:

• Tax savings through reduced taxable income
• Budgeting convenience with all car-related expenses packaged into a single, manageable payment
• Flexibility to adjust your lease package as your needs change
• Customisation options to tailor the lease to your preferred EV model and features

In addition to the tax savings and benefits of novated leasing, Australian drivers looking to purchase an electric vehicle can also take advantage of various government incentives and rebates. These initiatives aim to encourage the adoption of eco-friendly vehicles and support the transition to a more sustainable transportation future.

Federal Government's Electric Car Discount Bill

The federal government has recently introduced the Electric Car Discount Bill, which provides a significant boost to the adoption of electric vehicles (EVs) in Australia. This legislation exempts eligible electric car models from fringe benefits tax (FBT) until at least 2027, making them more affordable for both individual and fleet buyers.

Under this bill, eligible electric vehicles can be leased or purchased without the need to pay FBT, resulting in substantial savings for Australian drivers. This incentive, combined with the benefits of novated leasing, can make the transition to an EV even more financially attractive.

State-Based EV Incentives and Rebates

In addition to the federal government's initiatives, many state-based incentives and rebates are available to support the purchase of electric vehicles. These can include:

• Stamp duty exemptions or discounts for eligible EVs
• Registration discounts or waivers for electric and low-emission vehicles
• Rebates or financial incentives for the installation of charging infrastructure at homes and businesses

These state-level programs vary across different jurisdictions, so it's important to research the available incentives and rebates in your local area when considering the purchase of an electric vehicle.

When considering the purchase of an electric vehicle like the Tesla Model Y, it's important to compare the costs of paying cash versus using a novated lease. In many cases, the tax savings and other benefits of a novated lease can make it a more cost-effective option, even compared to paying the full purchase price upfront.

Example Scenario: Tesla Model Y

Let's look at an example scenario involving the Tesla Model Y. The purchase price of a Tesla Model Y in Australia is typically around $75,000. If you were to pay for the vehicle in cash, you would need to cover the full amount upfront.

Tax Savings with Novated Leasing

However, by using a novated lease, you can take advantage of significant tax savings. With a novated lease, you can pay for the Tesla Model Y and its associated running costs, such as insurance, registration, and maintenance, using pre-tax salary contributions. This means that you will pay less income tax and GST, resulting in substantial tax savings over the lease term. For example, if your annual salary is $100,000 and you choose to salary sacrifice

$20,000 towards your novated lease, you could save around $7,000 in income tax and GST per year. Over the typical 3-5 year lease term, this can add up to thousands of dollars in tax savings , making the novated lease a more cost effective option compared to paying cash.

Budgeting for Running Costs

When entering into a novated lease for an electric vehicle, it's essential to carefully consider and budget for the associated running costs. The novated lease allows you to package all of these expenses, such as maintenance, insurance, registration, and roadside assistance, into a single, convenient payment, which can be paid for using pre-tax salary contributions.

Flexible Budgets and Adjustments

One of the key advantages of a novated lease for an electric car is the flexibility it offers when it comes to budgeting and making adjustments. You can easily manage your monthly expenses using a salary packaging account, and if your needs change, you can often make adjustments to your lease package to accommodate your new requirements.

Additionally, the shortcut method allows you to calculate your savings upfront, making it easier to budget and plan for your electric vehicle expenses.

It's common for first-time electric vehicle drivers, including those taking out a novated lease, to have some degree of range anxiety. However, Australia's charging infrastructure has expanded significantly in recent years and continues to grow at a rapid pace.

The availability of public chargers, as well as the ability to charge your electric vehicle at home or your workplace, has helped to alleviate these concerns. With the increasing battery range of modern EVs and plug-in hybrids (PHEVs), many drivers can now comfortably complete their daily commutes without the need for frequent charging.

To further address range anxiety, consider choosing an EV or PHEV model with a range that suits your driving needs. By carefully evaluating your typical daily mileage and charging habits, you can select a vehicle that provides the perfect balance of performance and battery range.

As the charging infrastructure in Australia continues to expand, with more public chargers and home charging options becoming available, your ability to confidently transition to an electric vehicle will only continue to improve.

When considering a novated lease for an electric vehicle (EV), it's essential to choose the right model that aligns with your driving needs and preferences. Key factors to consider include the vehicle's battery range and overall performance.

Battery Range and Performance

The battery range of an EV is a crucial factor, as it determines the distance you can travel on a single charge. Look for eligible EVs that offer a range suitable for your daily commute and occasional longer trips. Additionally, consider the vehicle's performance characteristics, such as acceleration, top speed, and power delivery, to ensure it meets your driving expectations.

Plug-in Hybrids: A Transitional Option

If you're not quite ready to transition fully to a battery electric vehicle (BEV), plug-in hybrid electric vehicles (PHEVs) can serve as a transitional option. These vehicles combine an internal combustion engine with an electric motor, providing the benefits of both petrol and electric power. PHEVs are also eligible for the FBT exemption, making them a compelling choice for your novated lease.

Ultimately, the right EV model for your novated lease will depend on your driving habits, budget, and personal preferences. By carefully considering factors like battery range and performance, you can ensure that your chosen EV model aligns with your needs and provides a seamless and enjoyable driving experience.

Securing a novated lease for your new electric vehicle can be a straightforward process, especially when working with experienced leasing experts. By partnering with reputable leasing providers, you can navigate the novated leasing process seamlessly and ensure your lease package is tailored to your specific needs and preferences.

Working with Leasing Experts

Leasing experts play a crucial role in guiding you through the novated leasing process for electric cars. These professionals have in-depth knowledge of the available EV models, budgeting considerations, and government incentives that can impact your overall costs. They can help you explore different leasing options and ensure you make an informed decision that aligns with your driving needs and budget.

Tailoring Your Lease Package

One of the key advantages of working with leasing experts is the ability to customise and tailor your lease package to your specific requirements. This may include adjusting the lease term, running costs, and even the EV model to ensure it meets your driving needs and budget. By carefully considering factors such as your expected mileage, charging requirements, and personal preferences, the leasing provider can create a tailored lease package that optimises your overall experience and savings.

In conclusion, novated leasing presents a compelling option for Australian drivers looking to make the switch to an electric vehicle. By leveraging the tax savings and government incentives available, you can significantly reduce the upfront and ongoing costs of owning and operating an EV.

Whether you're drawn to the environmental benefits of electric cars or simply seeking a more cost-effective way to drive, a novated lease can help you achieve your goals. With the expanding charging infrastructure across Australia and a growing selection of eligible EV models, the barriers to EV ownership have never been lower.

By working with experienced leasing experts, you can tailor a novated lease package that perfectly fits your needs and budget. From budgeting for running costs to taking advantage of the latest government incentives, a novated lease for an electric vehicle can help you save thousands of dollars over the life of the vehicle.

As the transition to a more sustainable future accelerates, now is an excellent time to consider a novated lease for an electric car. With the potential for significant tax savings and access to the latest EV technology, this financing option can make your dream of driving an eco-friendly vehicle a reality.

How Driva Can Help You Finance Your Next Vehicle Purchase 

When it comes to financing your next vehicle purchase, Driva can provide you with the assistance you need to make the process smoother and more affordable. With options such as an EV novated lease, you can take advantage of the luxury car tax threshold and potentially save thousands of dollars on your next new car. By opting for an electric or plug-in hybrid vehicle, you can also benefit from the electric vehicle discount, saving even more on your car expenses. Driva compares 30+ lenders to ensure you get the best rate for your car loan, with transparent terms and no hidden fees. Whether you choose to lease an eligible vehicle or finance a new EV purchase, Driva can help you navigate the process and take your personal circumstances into account.

What is Novated Leasing and how does it work for electric cars?

Novated Leasing is an agreement between you, your employer, and a lease provider where your employer makes lease payments on your behalf from your pre-tax income. For electric cars, it allows you to lease an eligible electric vehicle with potential benefits such as FBT exemptions.

What are the benefits of Novated Leasing for electric or plug-in hybrid vehicles?

Novated Leasing for electric or plug-in hybrid vehicles can offer advantages like saving you thousands of dollars through FBT exemptions, discounted purchase prices, and lower running costs due to reduced emissions.

How can I determine if I am eligible for an electric or plug-in hybrid Novated Lease?

To be eligible for an electric or plug-in hybrid Novated Lease, you need to ensure that the vehicle meets the criteria set by the lease providers, such as being an eligible electric vehicle and complying with FBT regulations.

What is the significance of the FBT exemption for eligible electric vehicles in Novated Leasing?

The FBT exemption on eligible electric vehicles in Novated Leasing means that you can potentially enjoy tax benefits, saving you money on lease payments and reducing the overall cost of leasing an electric vehicle.

Are there specific lease providers in Australia that offer Novated Leases for EVs and plug-in hybrid vehicles?

Yes, there are leasing companies in Australia that specialise in providing Novated Leasing options for electric and plug-in hybrid vehicles. It's essential to research and choose a provider that offers competitive rates and includes electric models in their leasing options.

What role does the FBT play in Novated Leasing for electric cars?

The FBT, or Fringe Benefits Tax, is a tax paid by an employer on certain benefits provided to employees, including Novated Leasing arrangements. Understanding how FBT applies to Novated Leases for electric cars can help you make informed financial decisions.

What are some key considerations when deciding on Novated Leasing an electric vehicle?

When considering Novated Leasing for an electric vehicle, it's important to evaluate factors such as lease payments, interest rates, residual values, FBT implications, and potential savings compared to owning or financing a petrol vehicle.