Search for a novated lease used EV in Australia and every result is written by a company that sells novated leases. Handy, that. So here’s the independent version: yes, you can novated-lease a used EV and still claim the fringe benefits tax (FBT) exemption, the thing that makes the whole deal worth doing, but only if the car passes two tests that the sales pages tend to bury in the fine print. Get either one wrong and you’re paying FBT on a car you thought was exempt.
Here’s the thing: with used EV prices down 20-40 per cent since 2022 and some models now under $30,000 drive-away, a used EV on a novated lease is suddenly one of the cheapest ways into an electric car in this country. So the rules matter. Let’s go through them.
The short answer
A used EV qualifies for the FBT exemption if, per the ATO’s electric cars exemption rules:
- It’s a battery electric or hydrogen fuel cell car (plug-in hybrids no longer count; more on that below)
- The car was first held and used on or after 1 July 2022, by anyone, anywhere, ever
- Luxury car tax (LCT) has never been payable on the car, at any point in its history
- Your employer offers salary packaging and the car is used by you or your family
The first two dot points are where used-EV buyers get burned. A 2023 Tesla Model 3 you buy second-hand today? Exempt. An almost identical 2021 Model 3, now temptingly cheap? Never exempt. Not now, not ever: the 1 July 2022 line is permanent, and no amount of ownership changes resets it.
If that 2023-onwards Model 3 is exactly what you’re shopping for, our used Tesla Model 3 buyer’s guide covers what to check before you sign anything.
The 1 July 2022 rule, in plain English
The ATO’s wording is “first held and used on or after 1 July 2022”. Translated: the date that matters is when the car was first delivered and driven by its original owner, not when you buy it. The ATO confirms a second-hand EV can qualify, provided that first-use date lands on the right side of the line.
Practical check: look at the build date and, more importantly, the first registration date on the PPSR certificate (a Personal Property Securities Register check: the cheap online report that shows the car’s registration and finance history) or the rego papers. A car built in early 2022 but first registered and delivered in August 2022 can still qualify. A demo driven by dealer staff in June 2022 can’t. When in doubt, make the lease company confirm eligibility in writing before you commit, because they’re the ones who should wear the risk of getting it wrong, not you.
The LCT trap nobody mentions
This is the sneaky one. The exemption requires that LCT was never payable on the car, and for a used car, that means checking what it sold for when it was new, against the threshold that applied that year. The ATO is explicit: if a car’s price was above the fuel-efficient LCT threshold when first sold, it can never be FBT exempt, no matter how cheap it is now.
The numbers, from the ATO’s LCT threshold table: the fuel-efficient vehicle threshold was $84,916 in 2022-23, $89,332 in 2023-24, and sits at $91,661 for 2026-27.
So a high-spec 2022 EV that listed above the $84,916 threshold when new (think performance variants of popular models, now looking like bargains on the used market) may be permanently locked out of the exemption, while the boring base model next to it qualifies just fine. The used market has flipped the value equation: EV Central’s market data shows a 2022 Model Y RWD selling for around 48 per cent below its new price, and those high-volume base models are exactly the ones that pass both tests.
Almost everything in our best used EVs under $40,000 list clears both hurdles, which is not a coincidence.
What the May 2026 budget changed for the EV FBT exemption
In early May 2026, in the lead-up to the federal budget, the government announced it will wind back the exemption in stages. Per the official joint media release and PwC’s summary of the announcement:
- Until 31 March 2027: the full exemption continues unchanged
- 1 April 2027 to 31 March 2029: the full exemption only applies to EVs valued at $75,000 or less; EVs above that (but under the fuel-efficient LCT threshold) get a 25 per cent discount on the FBT otherwise payable
- From 1 April 2029: the full exemption disappears for new arrangements, replaced by a 25 per cent FBT discount for all eligible EVs
And existing leases are protected: arrangements already in place carry their treatment through, so nobody’s mid-lease deal blows up in 2027.
Now, the bit the headlines missed: for used-EV buyers, the 2027 change barely matters. The $75,000 cap is a new-car problem. Nearly every used EV worth buying in Australia sits well under $75,000, so a used-EV novated lease keeps the full exemption right through to 1 April 2029. The real deadline for you is 2029, not 2027. That’s still a genuine deadline: sign a lease before then and you lock in the full exemption; wait, and you’re in 25-per-cent-discount territory.
Does a used-EV novated lease actually stack up? The maths
The exemption’s value is simple: because no FBT applies, your entire lease payment plus running costs (electricity, rego, insurance, servicing, tyres) comes out of pre-tax salary.
Rough numbers: say you earn $90,000, which puts your marginal rate at 30 per cent plus the 2 per cent Medicare levy, 32 cents in the dollar. Package a used EV with lease and running costs of $12,000 a year, and you’re saving roughly $3,800 a year in tax versus paying for the same car from your after-tax pay. Over a three-year lease, call it $11,000 to $12,000. That’s the headline number the lease brochures shout about, and it’s real.
But three catches the brochures whisper:
- The GST saving shrinks or vanishes on used cars. On a dealer car, the finance company claims back the GST in the purchase price, and that saving flows to you. Buy privately and there’s no GST in the price, so there’s no credit to claim, and some providers won’t touch private sales at all.
- The interest rate and fees are where they make their money. Novated lease quotes routinely bury the effective interest rate. Ask for it in writing, then compare the total cost against a plain car loan plus paying running costs yourself. If they won’t tell you the rate, walk.
- It’s still “reportable”. No FBT is payable, but the ATO still counts the benefit as reportable, which can affect income tests: HELP repayments, Medicare levy surcharge, family payments. If you’ve got a HECS debt, do the sums before you sign, not after.
Also check the boring stuff: financiers cap the age of used cars. Smart, one of the biggest providers, requires the car to be under 12 years old at the end of the lease term, so a 2022 car on a five-year lease is fine, but older stock may not be financeable at all.
Yes, and here is the car to do it with
Yes, you can novated-lease a used EV in Australia, and for the right car it’s genuinely one of the best value plays going: used prices have already done the depreciating for you, and the tax office pays for a third of the running costs. Our default advice: pick a 2023-or-later, sub-$75,000 EV that was never LCT territory when new, buy it from a dealer so the GST credit flows, get the first-use date and LCT history confirmed in writing by the lease company, and demand the effective interest rate before signing. Do that before 1 April 2029 and you get the full exemption for the life of the lease. Skip anything first driven before July 2022, anything that was expensive when new, and any provider that won’t show you the rate. Power to the buyer.
Not sure what a fair price even looks like right now? Start with our breakdown of used EV prices in 2026.
Can I novated-lease a used EV bought from a private seller?
Usually yes, though some providers restrict or refuse private-sale cars. You also lose the GST credit on the purchase price, since private sales don’t include GST. The income tax savings on payments still apply, so it can still stack up, just expect a slightly smaller total saving than a dealer car.
Is a used plug-in hybrid (PHEV) still FBT exempt?
No. The PHEV exemption ended for new arrangements on 1 April 2025. Only pre-existing, binding arrangements from before that date keep the exemption. For a new lease today, it’s battery electric or hydrogen only.
What happens to my lease when the rules change in 2027 and 2029?
Nothing, if you’re already in one: existing arrangements carry through under the announced transition. New leases on EVs of $75,000 or less keep the full exemption until 1 April 2029; after that, new arrangements get a 25 per cent FBT discount instead of a full exemption.
