Salary Packaging an FBT‑Exempt Electric Car: Big Benefits for Employees

At the 2025 Tax Schools seminar, experts highlighted how employees can save over $5,000 per year by salary packaging an FBT‑exempt electric vehicle (EV)—such as a novated lease arrangement for a Tesla Model 3—thanks to the ATO’s zero fringe benefits tax rule

✅ How It Works

• Employers providing eligible EVs incur no FBT liability—meaning costs aren’t passed on to employees.
• Costs covered by salary packaging include:
• Lease repayments
• Running costs: insurance, servicing, registration, charging
• Electricity for charging

💰 Savings Breakdown

Here’s a snapshot of estimated benefits for a Tesla Model 3 RWD under a three‑year novated lease (based on a $100,000 salary):

• Annual savings: ~$4,600
• Three-year saving: ~$13,900 — thanks to no FBT and pre-tax cost reductions

🔍 Who Qualifies?

• The vehicle must be:
• A zero or low emissions vehicle (ZLEV)
• Held and used first time on or after 1 July 2022
• Priced under the Luxury Car Tax threshold (~$91,387)
• Note: From 1 April 2025, plug-in hybrids (PHEVs) no longer qualify unless they were already in use and in a binding arrangement before that date

⚠️ Important Considerations

• Even though it's FBT-exempt, the benefit is reportable on your PAYG income statement—as a Reportable Fringe Benefits Amount (RFBA)—which may affect HECS, family tax benefits, etc.
• To qualify, there must be a binding novated lease agreement in place before key deadline dates

🛠 What You Should Do

1. Check vehicle eligibility (zero emissions, price under LCT threshold)
2. Enter a novated lease agreement by 1 April 2025 if opting for a PHEV
3. Understand the RFBA implications—especially for government benefits or loans

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