EV Novated Lease and FBT: How Home-Charging Electricity Is Treated

The FBT exemption covers your home-charging electricity (for eligible EVs)

The EV FBT exemption removes the tax hit on the car benefit entirely, and it extends to electricity used for charging. 1ato.gov.auView source The ATO's own words: "the cost of fuel (including electricity) to charge it is exempt from FBT. However, the benefit is reportable." That second sentence matters. You pay no FBT, but the home-charging amount still shows on your income statement. It appears as a reportable fringe benefit amount (RFBA). That can affect income-tested payments and the Medicare levy surcharge. Your lease provider can work through the RFBA impact for your package.

To qualify, your car must meet four conditions. It must be a zero or low emissions vehicle (battery electric or hydrogen fuel-cell). It must have first been held and used on or after 1 July 2022. 1ato.gov.auView source It must be used by you as a current employee, or by your associates. And luxury car tax (LCT) must never have been payable on the car. 5zecar.comView source

The LCT condition uses the fuel-efficient vehicle threshold. For 2025-26, that is $91,387, rising to $91,661 for 2026-27. 1ato.gov.auView source 5zecar.comView source A car below the threshold at its first retail sale stays eligible even if the threshold moves later. The ATO reviews this each year. Check ato.gov.au before you base a decision on a specific price.

One more point: any break or gap in your novation agreement can end the exemption for that period. A lease provider who knows the FBT rules will flag this before it becomes a problem.

Which vehicles qualify: BEV yes, PHEV mostly no from April 2025

Battery electric vehicles (BEVs) and hydrogen fuel-cell cars remain fully eligible for the exemption. Plug-in hybrid electric vehicles (PHEVs) lost eligibility from 1 April 2025. 6ato.gov.auView source 5zecar.comView source The ATO confirmed: "From 1 April 2025, a plug-in hybrid electric vehicle will not be considered a zero or low emissions vehicle under FBT law and is not eligible" for the car exemption. So if you drive a PHEV and signed your lease after that date, the exemption does not apply.

There is a transitional exception, but it is narrow. Your PHEV must have been in an exempt arrangement before 1 April 2025. Your employer must also have had a firm financial commitment to continue that arrangement on and after that date. 6ato.gov.auView source 1ato.gov.auView source Both must be true. Any break, or a commitment that was not locked in before the cut-off, closes the transitional path.

For PHEVs that still qualify, the PCG 2024/2 shortcut works differently. You can only claim it for the kilometres your PHEV drove on electric power, not total kilometres. That requires fuel receipts and a separate figure to isolate the electric share. More work than for a BEV.

The PCG 2024/2 shortcut turns kilometres into a claimable electricity amount

Before PCG 2024/2, working out your exact home-charging electricity cost meant either installing a sub-meter or splitting your household power bill. The ATO recognised this was impractical. So they published the shortcut, letting employers and lease administrators calculate home-charging costs without metering. 2ato.gov.auView source 7zecar.comView source

The calculation is simple: total kilometres driven in the FBT year, multiplied by the rate. 2ato.gov.auView source For the FBT year starting 1 April 2026 (April 2026 to March 2027), the rate is 5.47 cents per kilometre. 3ato.gov.auView source 4novatedlease.guideView source For earlier FBT years from 1 April 2022 through 31 March 2026, it was 4.20 cents per kilometre.

A worked example: a driver covering 15,000 km at the 5.47c/km rate produces a home-charging amount of around $820 for the FBT year starting April 2026. 4novatedlease.guideView source This varies with kilometres driven. The ATO reviews the rate each FBT year, so the figure after 2026-27 is not yet set. Check ato.gov.au before the next year begins.

Under a novated lease, the employer applies the shortcut through the lease provider. The result is an exempt car-expense payment benefit: the employer reimburses you at the shortcut rate, and no FBT is payable on that amount. 7zecar.comView source 4novatedlease.guideView source It still appears in your RFBA. Mention it to your lease provider when reviewing your package.

The shortcut is also available for individuals claiming work-related car expenses on their own tax return, but in a novated-lease context it is the lease administrator who applies it on behalf of the employer as part of the annual FBT reconciliation.

Three records are all you need to use the shortcut

The paperwork for PCG 2024/2 is light. You (or your lease provider) need three things: odometer readings at the start and end of the FBT year, at least one power bill showing your home is on the grid, and an employee declaration that you charged at home. 7zecar.comView source 2ato.gov.auView source That is it.

No need to log every charging session, split your power bill, or fit a sub-meter. The shortcut was built to avoid all of that. 7zecar.comView source

One rule tightened from 2024-25: actual odometer readings are now required, not estimates. The earlier years (2022-23 and 2023-24) allowed reasonable estimates. 7zecar.comView source From 2024-25, a real reading at the start and end of each FBT year is mandatory. Your lease administrator will usually take these at lease start and at each annual review.

A home charging station (the hardware itself) is treated differently. The ATO confirmed it is not a car expense under the standard car fringe benefit rules. 1ato.gov.auView source It may be a property benefit or an expense payment benefit instead. Ask your lease provider how they handle installation costs if your employer funds the unit.

Shortcut vs invoice method: which suits you

You must choose one method for the whole FBT year. 7zecar.comView source 2ato.gov.auView source The shortcut is simpler for most drivers on a novated lease. The invoice method may work better if your actual electricity cost is low or if you mostly charge at public stations where you have receipts.

How home charging fits into the overall novated-lease running cost

Under a full novated-lease arrangement for an eligible BEV, the exempt package covers lease repayments, registration, insurance, maintenance and the home-charging electricity worked out under PCG 2024/2. Your lease provider builds all of this into the salary-sacrifice amount.

Your actual home-charging tariff affects whether the shortcut over- or under-recovers your real spend. A driver doing 15,000 km a year uses roughly 2,500 kWh for home charging at typical Australian rates. The shortcut at 5.47c/km produces around $820 for that distance. That is in a similar range to actual cost at current tariffs. Close enough for most. The shortcut is built for ease, not exact cost recovery. Choosing an EV electricity tariff plan with a lower overnight rate cuts your actual cost and makes the shortcut look more generous by comparison.

The RFBA effect is a separate number your lease provider works out. Even for a fully FBT-exempt EV, the reportable fringe benefit amount can affect some government payments and your Medicare levy surcharge. It depends on your package and income. Your lease provider or a registered tax agent is the right person to run through that.

If you charge away from home using a portable EV charger or a public network, those costs sit outside the home-charging shortcut. Public-charging costs backed by receipts may be claimed under the invoice method. That is one reason some drivers choose the invoice path.

Budget 2026 changes are announced but not yet law: what to watch

On 4-5 May 2026, the federal government announced a phased change to the EV FBT exemption. As at 14 June 2026, the legislation had not yet been introduced or passed. These are announced policy only, not settled law. Check the ATO's new legislation page (ato.gov.au/about-ato/new-legislation) for current status before relying on any of these figures.

Here is the announced three-phase structure, based on multiple sources as at research date. 8austax.toolsView source 5zecar.comView source 9novatedlease.guideView source The first phase runs from now through 31 March 2027 with no change. From 1 April 2027, the second phase would split eligibility by price: EVs under $75,000 would keep the full exemption, while EVs between $75,001 and the LCT threshold would get only a 25% FBT discount. From 1 April 2029, the third phase would extend that 25% discount to all eligible EVs.

Announced grandfathering would protect existing leases entered before each phase-change date. 9novatedlease.guideView source 5zecar.comView source This has not been confirmed in any enacted law. Whether the $75,000 threshold is fixed or will be indexed is also unconfirmed.

The PCG 2024/2 shortcut for home charging is a separate ATO tool and is not directly affected by these changes. If Phase 2 or 3 is enacted, the shortcut would still calculate the home-charging component. The maths gets more complex under a partial exemption. Your lease provider will need to work through that if and when the law passes.

If you are about to sign or renew a novated lease and the Phase 2 date is getting close, talk to your lease provider before you commit. The grandfathering rules and the $75,000 threshold are both unconfirmed.

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