Beating Bracket Creep and Rising Fuel Costs: How an EV Novated Lease Saved One eCarz Client Over $8,000 a Year
Bracket creep and rising fuel prices are two of the biggest financial pressures facing Australians today. Even when your purchasing power hasn’t increased, bracket creep can push more of your income into higher tax brackets. At the same time, global events continue to drive fluctuations in petrol prices, making everyday running costs harder to predict.
The good news? There’s a legitimate, ATO-recognised strategy that can help reduce both your tax bill and your vehicle running costs: funding an eligible electric vehicle through a novated lease.
A Real Result: The Tesla Model Y That Reduced a Tax Bill
One of our recent clients, a self-employed business owner operating through his own company, purchased a new Tesla Model Y using a novated lease.
Because the lease repayments were made from pre-tax income, his taxable income reduced enough to move into a lower tax bracket.
The outcome was significant. He saved more than $8,000 per year in tax—more than enough to cover his monthly lease repayments. On top of that, he’s driving a brand-new electric vehicle while spending a fraction on charging compared to petrol.
Every taxpayer’s circumstances are different, and savings depend on factors including income, vehicle choice and individual financial circumstances. However, this example highlights the potential benefits when a novated lease is structured correctly.
Why EV Novated Leases Are So Tax-Effective in 2026
Much of the benefit comes from the Federal Government’s Fringe Benefits Tax (FBT) exemption for eligible electric vehicles.
Pre-tax repayments
Lease repayments, along with many running costs such as charging, insurance, registration and servicing, are generally paid from pre-tax income, helping reduce your taxable income.
FBT exemption
Eligible battery electric vehicles priced below the luxury car tax threshold for fuel-efficient vehicles ($91,661 for 2026–27) are exempt from Fringe Benefits Tax, removing one of the biggest costs traditionally associated with employer-provided vehicles.
Lower running costs
Charging an EV typically costs far less than filling a petrol vehicle, particularly when charging at home, helping shield drivers from fuel price volatility.
Helping offset bracket creep
By reducing taxable income, a novated lease may help offset the effects of bracket creep. For some Australians, it may even reduce taxable income enough to move into a lower tax bracket.
Important note: Plug-in hybrid electric vehicles (PHEVs) no longer qualify for the FBT exemption from 1 April 2025. The exemption now applies only to eligible battery electric and hydrogen fuel cell vehicles.
Especially Beneficial for the Self-Employed
If you operate through your own company and pay yourself a salary, a novated lease can be an effective way to finance your next vehicle.
Your company can provide the vehicle under a novated lease arrangement, allowing you to take advantage of the FBT exemption while reducing taxable income through pre-tax repayments. This is the same approach used by our Tesla Model Y client and one we regularly discuss with self-employed business owners.
Exclusive EV Offers Through the eCarz Car Brokerage Team
At eCarz, we offer more than just novated leasing.
Our in-house car brokerage team provides access to exclusive pricing on selected electric vehicles, including competitive offers on Denza and Geely—two of Australia’s fastest-growing EV brands.
We also offer a full range of novated lease options, including fully maintained novated leases that package finance and running costs into one convenient pre-tax payment.
From sourcing the right vehicle at a competitive price to structuring the lease for maximum tax efficiency and managing the process from start to finish, our team handles every step.
Frequently Asked Questions
How much can I save with an EV novated lease?
Savings vary depending on your income, vehicle choice and lease structure. Between the FBT exemption, pre-tax repayments and lower operating costs, many Australians save thousands of dollars each year. In our recent client example, the annual tax saving exceeded $8,000.
Which EVs qualify for the FBT exemption?
Eligible battery electric and hydrogen fuel cell vehicles first held and used on or after 1 July 2022, with a value below the luxury car tax threshold for fuel-efficient vehicles ($91,661 for 2026–27), may qualify. Popular examples include the Tesla Model Y, along with a growing range of models from brands such as Denza and Geely.
Can I get a novated lease if I’m self-employed?
Yes. If you pay yourself a salary through your own company, you may be eligible to enter into a novated lease through that company. For many self-employed Australians, it’s one of the most tax-effective ways to finance a vehicle.
What is a fully maintained novated lease?
A fully maintained novated lease combines your vehicle finance and many ongoing running costs—including charging, servicing, tyres, registration and insurance—into one regular pre-tax payment, making budgeting simpler while maximising potential tax benefits.
Ready to Turn Tax and Fuel Costs Into Savings?
Tax pressures and fuel prices aren’t going away anytime soon. An eligible EV novated lease could help reduce both.
Talk to the ECARZ team today to find out whether a novated lease is right for you, and ask about our exclusive Denza and Geely offers while they’re available.
Disclaimer: This article contains general information only and does not take into account your personal objectives, financial situation or needs. Tax outcomes vary between individuals. Consider seeking advice from a registered tax agent or licensed financial adviser before entering into a novated lease. Information is based on legislation and thresholds current at the time of writing.