The same pre-tax move as a deduction, pointed at your biggest everyday cost. Pay for an electric car — and its running costs — out of your salary before tax, with the fringe-benefits tax that normally claws this back legally switched off.
1The idea
Salary packaging means paying for certain things straight from your pre-tax salary, so your taxable income — and your tax — drop. A novated lease does this for a car: your employer pays the lease and running costs from your gross pay.
Normally the catch is fringe-benefits tax — the tax office taxes the employer on perks like a car, which cancels most of the saving. But since 1 July 2022, eligible electric cars are exempt from it. So the whole package — finance, insurance, registration, electricity, servicing, tyres — comes out before income tax and before fringe-benefits tax. You're paying with pre-tax dollars for something you'd otherwise buy with after-tax ones.
It's the deduction idea again — a cost taken off the top at your marginal rate — just applied to the second-biggest thing most households buy.
2Who it's for
Employees whose employer offers novated leasing (most medium and large employers, via a salary-packaging provider).
You want a battery-electric car priced under the luxury-car-tax threshold for fuel-efficient cars (~$91k). The higher your marginal rate, the bigger the win.
New or second-hand — both work. A novated lease isn't only for new cars, and a used electric car keeps the fringe-benefits-tax exemption as long as it was first sold new on or after 1 July 2022 (and was under the price cap when new). A lightly-used one is often the sweet spot — you skip the first-year depreciation from the last lesson and still pay pre-tax.
Plug-in hybrids lost the exemption from 1 April 2025 — only fully electric cars (and hydrogen) still qualify.
Work for a not-for-profit charity, or a public or not-for-profit hospital? These employers get an even bigger break — you can package roughly $9,000 to $15,900 of everyday spending (rent, groceries, bills) from pre-tax salary each year. Ask your payroll team.
3The worked example
Take a $65,000 electric car, kept 3 years on a 39% rate (about a $140,000 salary). Say you sell it for about $35,000 at the end. A common myth is that the lease "gives the depreciation back." It doesn't:
What the car loses (depreciation)−$30,000
What the lease saves you in tax+$13,500
You're still out, on the car−$16,500
The depreciation is a real loss, and a personal car isn't tax-deductible — so none of it comes back. The lease only lets you pay from pre-tax salary, saving 39% on the ~$34,500 you finance over the term — not on the ~$30,500 residual you pay after tax to own it. It helps you pay for the car; it can't refund what the car loses.
4Try it on your numbers
What you save vs what the car loses
The tax saving and the depreciation are two separate things — here's both, side by side.
Keep it for3 yrs
The tax doesn't give the depreciation back. A personal car isn't deductible, so you save tax on the payments you make from pre-tax salary — never on the value the car loses.
What the car loses−$30,000
depreciation — what you pay minus what you sell it for, never refunded
What the lease saves you in tax+$13,466
39% on the $34,528 you pay from pre-tax salary
So the car really costs you — with the lease$15,695
the same car, paying cash$29,161
The lease saves you the tax ($13,466) — you still wear the rest of the depreciation.
You save your tax rate only on the part paid from pre-tax salary; the residual (the tax-office minimum you pay at the end to own the car) is after tax, so it isn't saved — refinance it and more becomes pre-tax. Excludes interest, fees and running costs (insurance, electricity, servicing) — those are pre-tax too, a further saving not shown here. A genuine work car is different: there you can claim depreciation. Estimates only.
5The honest caveats
A car isn't an investment. The previous lesson showed how fast it loses value — this just makes one you'd buy anyway cheaper. The real wealth move is to invest the money you save, not to lease a fancier car because it's "pre-tax".
You don't own it until the end. A lease has a residual (balloon) payment to keep the car — budget for it, or you're financing forever.
Compare the all-in quote. Packaging providers add fees and an interest rate; get the drive-away novated number against a normal car loan before signing.
The lease is novated to your employer — change jobs and you take it with you, but a gap in employment means you cover the payments yourself.
6How to action it
Ask payroll or your employer whether they offer novated leasing and who the provider is.
Get a full quote on an eligible electric car — new, or used and first sold after 1 July 2022 — including the residual, and put it beside a normal loan on the same car.
Decide what you'll do with the saving — sweep it into super, shares or your offset, so the tax break becomes wealth instead of a bigger car.
General educational information, not personal tax or financial advice. Fringe-benefits-tax, novated-lease and electric-car-eligibility rules have detail and change (thresholds are indexed; the plug-in-hybrid exemption ended 1 April 2025) — confirm your specifics with a registered tax agent or at ato.gov.au. Figures are estimates for the 2025–26 financial year.