Plug-in hybrids
Plug-in hybrids lost the FBT exemption in 2025
Updated
A plug-in hybrid has a petrol engine as well as a battery, and for new novated leases that has mattered since 1 April 2025. Only older leases that were already running keep the exemption, and only until they change.
The rule since 1 April 2025
From 1 April 2025 a plug-in hybrid is not a zero or low emissions vehicle under FBT law, so it is not eligible for the electric cars exemption. (ATO, checked )
An existing arrangement keeps the exemption only if the car was used, or available for use, before 1 April 2025 and there is a financially binding commitment to keep providing it on and after that date. The ATO says it has no discretion to extend the date, even when delivery was delayed. (ATO, checked )
The exemption now covers battery electric and hydrogen fuel cell cars designed to carry less than one tonne and fewer than nine passengers. (ATO, checked )
What ends an older plug-in hybrid lease's exemption
- Taking up an option to extend the lease. An option is not a binding commitment, so the exemption ends where the fixed term ends. (ATO, checked )
- A break in the novation, such as unpaid leave during which you pay the lease yourself. (ATO, checked )
- A change to the financial obligations, such as new lease payments or a new residual value, including adding accessories that change them. (ATO, checked )
- Changing employer, which creates a new commitment by the new employer. (ATO, checked )
What a plug-in hybrid lease costs in FBT terms
Without the exemption, the car’s taxable value under the statutory formula is 20% of its base value each year, reduced by anything you contribute from after-tax pay. (ATO, checked )
Most novated leases clear that by having you pay the taxable value from after-tax salary instead of pre-tax. The cost of the switch is the income tax and Medicare levy on that slice of your salary. The table shows it for three plug-in hybrid prices and four salaries. The same car as a battery electric under the luxury car tax limit would cost nothing in this column.
Extra tax a year on a new plug-in hybrid novated lease
| Car's value | After-tax payment | $70k salary | $100k salary | $150k salary | $200k salary |
|---|---|---|---|---|---|
| $50,000 hybrid | $10,000 | $3,300 | $3,200 | $3,900 | $4,700 |
| $60,000 hybrid | $12,000 | $3,970 | $3,840 | $4,680 | $5,480 |
| $70,000 hybrid | $14,000 | $4,640 | $4,480 | $5,460 | $6,260 |
Estimate only. General information, not tax advice. It uses 2026–27 tax rates and the FBT statutory formula, and assumes you pay an after-tax contribution to clear any FBT. Confirm your numbers with your employer, your novated lease provider or a registered tax agent.
Weighing a plug-in hybrid against a battery electric car? Put the electric car’s price into the calculator to see the exemption it keeps, and check the 2027 changes before you pick a signing date.
Questions
I signed a plug-in hybrid novated lease in 2024. Is it still exempt?
It can be, if the car was used or available for your private use before 1 April 2025 and there is a financially binding commitment to keep providing it after that date. The exemption stops from the date of any new commitment, such as a changed lease, a break in the novation, or a new employer.
Does the 2027 draft bring plug-in hybrids back?
No. The draft's new 25% and 100% discounts apply only to battery electric and hydrogen fuel cell cars, so a plug-in hybrid on a new lease stays under the ordinary FBT rules.
Is a plug-in hybrid novated lease still worth it?
It can be, because most of the lease and running costs still come out of pre-tax salary, but the slice equal to the car's taxable value moves to after-tax pay, and that is the exemption's biggest saving gone. Compare the after-tax cost with the same lease on a battery electric car under the luxury car tax limit, and get quotes for both.