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Novated leasing a used Tesla: FBT exemption

Last checked: 29 October 2026 against the ATO electric cars exemption page, luxury car tax thresholds, FBT rates and thresholds, Practical Compliance Guideline PCG 2024/2, the ATO electric vehicles and fringe benefits tax fact sheet, and the Treasury Laws Amendment (Electric Car Discount) Act 2022. This is general information, not financial or tax advice. Check the car and the lease with your employer, the lease provider, or a registered tax agent before you sign.

Short answer: A novated lease on a used Tesla can be exempt from fringe benefits tax only if the car passes every test. It must be a battery electric car, first held and used on or after 1 July 2022, provided to a current employee or a family member, and luxury car tax must never have been payable on it. The price in the ad is not the test. The GST-inclusive value at the first retail sale, and at every later sale, has to have been below the fuel-efficient luxury car tax threshold for that year. The private use is still a reportable fringe benefit. A Model S or Model X first used before 1 July 2022 does not qualify.

What a novated lease is

The employee leases the car from a finance company. The employer, the finance company and the employee then sign a deed of novation, and the employer takes over all or part of the employee’s rights and obligations. The ATO says car leasing for an employee’s private use is commonly done this way, inside a salary sacrifice arrangement. Benefits provided under salary packaging are included in the electric car exemption.

Two shapes are in the ATO’s description of the deed:

  • Full novation. The employer makes the lease payments and guarantees the residual value at the end.
  • Split full novation. The employer makes the lease payments. The employee keeps the residual.

The deed usually hands those obligations back when the lease ends or the employee leaves, so the employee can novate it to a new employer. A private purchase, with no employer in the arrangement, is not this exemption. There is no fringe benefit to exempt.

The four conditions

The ATO says you do not pay fringe benefits tax on the private use of an electric car, or on its associated car expenses, only when all of these are true:

  • The car is a zero or low emissions vehicle.
  • The first time it is both held and used is on or after 1 July 2022.
  • A current employee, or an associate such as a family member, uses it or has it available.
  • Luxury car tax has never been payable on the importation or sale of the car.

That list is section 8A of the Fringe Benefits Tax Assessment Act 1986, as applied by the Treasury Laws Amendment (Electric Car Discount) Act 2022: the car must first have been both held and used at or after 1 July 2022, and no luxury car tax may have become payable on a supply or importation before the benefit. On a lease, the ATO treats it as a car benefit only when the lease is bona fide. If it is not, it can be a property or residual fringe benefit, and this exemption does not apply.

A zero or low emissions vehicle is a battery electric vehicle or a hydrogen fuel cell electric vehicle, and it must be a car: a load under one tonne, and fewer than 9 passengers including the driver. A battery electric vehicle uses only an electric motor and has neither a fuel cell nor an internal combustion engine. A Tesla Model 3, Model Y, Model S or Model X built that way meets that definition. Motorcycles and scooters do not.

From 1 April 2025 a plug-in hybrid is not a zero or low emissions vehicle. The Act keeps an exception only where that hybrid was already exempt before 1 April 2025 and, before that date, there was a binding commitment to keep providing the same car, with no new commitment on or after 1 April 2025. A battery electric Tesla is not a plug-in hybrid, so that end date does not remove it.

Treasury’s statutory review (final report, May 2026) recommended the Government consider changes to manage the cost, including a possible phase-down. That is not itself a change to the law. The ATO page, updated 1 April 2026, still sets out the exemption above.

First held and used on or after 1 July 2022

Held means owned (including under hire purchase), leased, or otherwise made available. Used means used, or available for use, by anyone. Both have to be true for the first time on or after 1 July 2022.

Owning the car before that date is fine if nobody used it, and it was not available for use, until on or after 1 July 2022. Using it earlier is fatal, including for a later owner. The ATO’s examples are a car delivered on 15 June 2022 and first made available on 5 July 2022 (eligible), and a car made available on 1 April 2022 then sold in August 2022 (not eligible for the next employer). Registration, insurance and lease papers are the records the ATO points to.

Our Model S and Model X guide records that Australian deliveries of those models finished at the end of 2020. A car delivered and used then was first used before 1 July 2022, so the exemption does not apply, whatever the ad price is. The same date test knocks out a Model 3 or Model Y that was already on the road before 1 July 2022.

First retail sale, not today’s price

Luxury car tax is 33% of the amount over the threshold. For this exemption the ATO uses the fuel-efficient threshold, not the lower one for other vehicles. The value has to be below that threshold when the car is first sold in a retail sale, and at any later sale. Buying it second-hand means checking whether luxury car tax was payable at any earlier point.

A lower price now does not repair an earlier sale. In the ATO’s example a dealer sold a new electric car on 1 July 2022 for a GST-inclusive $85,000, and it was resold on 31 July 2022 for $83,000. The 2022-23 fuel-efficient threshold was $84,916, so luxury car tax was payable on the first sale and the car stayed ineligible.

If that history is missing, the ATO says to work it out another way: an internet search, a car report, or an independent valuation. In the fact sheet’s example the recommended retail price when new was over the threshold, and the exemption did not apply.

Financial year of the saleFuel-efficient threshold
2026-27$91,661
2025-26$91,387
2024-25$91,387
2023-24$89,332
2022-23$84,916
2021-22$79,659

Use the year of the first retail sale, and of each later sale, not the year you sign. The ATO table goes back to 2012-13. From 1 July 2025 a fuel-efficient car is one that does not exceed 3.5 litres per 100 kilometres combined. Before that date the figure was 7 litres. A battery electric vehicle has no internal combustion engine, so the exemption uses the fuel-efficient column.

A car that passes the date test still fails if luxury car tax was payable. Treasury’s review put the Tesla Model Y’s first two months of sales, March and April 2023, in the group of battery electric vehicles priced above the luxury car tax threshold. Those cars do not qualify, even though they were first delivered after 1 July 2022. Another Model Y or a Model 3 depends on its own first retail price. RWD, Long Range and Performance are different cars for that check.

It still appears on the income statement

The employer works out a notional taxable value of the car benefit as if section 8A did not apply. Section 135P requires that. Registration, insurance, repairs or maintenance, and electricity are exempt car expenses, and the fact sheet says they are not included in the reportable amount.

If the taxable value of reportable benefits in the FBT year (1 April to 31 March) is more than $2,000, the employer reports the grossed-up amount on the income statement or payment summary. For FBT years ending 31 March 2023 through 31 March 2027 the lower gross-up rate is 1.8868. A taxable value of $2,000.01 is a reportable amount of $3,773. You are not income-taxed on it. It counts in income tests for family assistance, child support and some other government benefits and obligations.

The employer picks the statutory formula or the operating cost method, whichever is lower. From 1 April 2014 the statutory rate is a flat 20% of the car’s base value. A pooled car is not reportable. A one-employee novated lease is not pooled.

Charging at home

Electricity to charge an eligible electric car is an exempt car expense. Home charging is hard to separate from the household bill, so PCG 2024/2 allows a choice, per car, for the whole FBT year or income year: the cents-per-kilometre rate, or the actual cost.

FBT year endingEV home charging rate
31 March 20275.47 cents per km
31 March 2023, 2024, 2025 and 20264.20 cents per km

The FBT year that started on 1 April 2026 uses 5.47 cents. The same rate applies to an income year commencing on or after 1 April 2026. The ATO’s 2026-27 example is 10,000 km with 75% charged at home: 7,500 km times 5.47 cents is $410.25. If the car cannot report the home-charging share, you either use the home rate and ignore commercial charging receipts, or use the receipts and not the home rate.

Keep odometer records to 31 March or 30 June. An individual claiming a deduction also needs one home electricity bill for that income year. A reimbursement of home charging under a novated lease on an eligible car is an exempt car expense. Reimbursed under the salary sacrifice, it is not an employee contribution, so it does not reduce the notional value. A home charging station is not an exempt car expense. If one is bundled into the lease, its cost has to be split out. What to look for on the car itself is in the home charging guide.

What to check before you sign

  1. The employer is in the deed. The exemption is a car benefit for a current employee or their associate. A side email is not the novation.
  2. The first use date. Registration, insurance and any earlier lease. If the car was used before 1 July 2022, the exemption is not available.
  3. Every sale price against the table above. First retail sale and each later sale, GST-inclusive, in the financial year of that sale. If the chain is missing, use a valuation or the recommended price when new, which is what the ATO describes.
  4. The residual, and whose it is. Full novation: the employer guarantees it. Split full: you do. It must be a reasonable estimate of market value at the end, not a figure reduced by your trade-in or cash, and not below the minima in ATOID 2002/1004. For a car with an eight-year effective life, acquired on or after 1 July 2002, that ID sets 65.63% (1 year), 56.25% (2), 46.88% (3), 37.5% (4) and 28.13% (5). It stops at five years. The lease must not already promise that you, a relative or a nominee will buy the car or keep it. The dealings also have to be at arm’s length. Those are the ATO’s bona fide conditions. They are not a lender’s age or kilometre cap. Ask the provider whether this car is inside their own rules.
  5. Leaving the job. The obligations usually come back to you. Ask what that does to the payments and the residual.
  6. Battery, warranty, insurance. A like-for-like battery can be a repair, and an exempt car expense, if the car qualifies. A battery with significantly more power, storage and life can be capital, and is then added to the cost used for the notional value. Read the battery health guide and the warranty guide. Insurance on an eligible car is an exempt car expense. The policy is separate, and this site has no insurance guide. The inspection checklist is the rest of the car.
  7. Stamp duty and the reportable amount. Duty is not in the ATO’s list of exempt car expenses. It is a state charge, covered in the stamp duty guide. Ask what reportable fringe benefits amount the packaging will produce, and whether that changes an income test you rely on.

FAQ

Does buying a used Tesla myself, with no employer, get this exemption? No. It is an exemption for a car benefit provided because of employment.

The advertised price is under the threshold. Is that enough? No. The first retail sale and every later sale have to have been below the fuel-efficient threshold for the year of that sale.

Does a Model 3 or Model Y first used before 1 July 2022 qualify if I novate it now? No. A later lease does not restart the first held-and-used date.

Do plug-in hybrids still qualify? Not on a new arrangement from 1 April 2025. A battery electric Tesla is outside that change.

The lease is exempt. Why is there an amount on my income statement? The car benefit is still reportable. Over $2,000 of taxable value in the FBT year, the grossed-up amount is reported. You do not pay income tax on it. It can affect income tests.

Which home charging rate applies now? 5.47 cents per kilometre for the FBT year ending 31 March 2027. 4.20 cents for the FBT years ending 31 March 2023 to 31 March 2026. Actual cost is the other method.

Is a home charger in the lease exempt too? No. Electricity can be. The charging station is a separate fringe benefit.

Sources

Model 3 and Model Y

Browse Model 3 and Model Y, or Model S and Model X. Compare asking prices on the price guide before you put a car into a lease. Live stock is on the classifieds.