EV Novated Lease Changes: Why Businesses Should Review Their Options Before 2027

The Federal Government has announced upcoming changes to Fringe Benefits Tax (FBT) concessions for electric vehicles (EVs), giving Australian businesses and employees an important opportunity to review their novated leasing options before the new rules begin taking effect.

Over recent years, EV novated leasing has become increasingly popular across Australia. The current FBT exemption for eligible electric vehicles has helped make EVs more affordable for employees while also supporting businesses looking to offer attractive employee benefits.

Under the existing rules, eligible EVs provided through novated leasing arrangements can receive a full FBT exemption, provided the vehicle falls below the fuel-efficient vehicle Luxury Car Tax (LCT) threshold. This has allowed many employees to reduce the overall cost of vehicle ownership while encouraging the transition toward lower-emission vehicles.

However, the Government has now confirmed that changes to these concessions will gradually be introduced over the coming years.

For businesses and employees considering EV novated leasing, understanding these upcoming changes may help with financial planning and decision-making before FY2027 and beyond.

Here’s how the transition will work.

Until 31 March 2027

• The full FBT exemption for eligible EVs remains unchanged
• Existing EV novated leases are not affected

From 1 April 2027 to 31 March 2029

• Full exemption continues for EVs valued up to $75,000
• Higher-priced EVs below the Luxury Car Tax threshold will receive a 25% FBT discount instead of a full exemption

From 1 April 2029 onwards

• The full exemption will transition into a permanent 25% FBT discount structure

Importantly, employees who already have an EV novated lease in place will not be impacted by these changes. Existing agreements will continue under the current arrangements, providing certainty for those who have already entered into leasing contracts.

For businesses and employees who are still considering EV novated leasing, the period before March 2027 may provide significant advantages. Entering into a new eligible EV lease before the changes begin may allow employees to access the full FBT exemption while current concessions remain available.

For many Australian businesses, novated leasing has become part of broader employee attraction and retention strategies. Offering flexible vehicle options can support employee satisfaction while also helping businesses remain competitive in attracting skilled workers.

At the same time, EV adoption continues to grow across Australia as businesses look for practical ways to reduce fuel expenses and modernise vehicle fleets. Lower running costs, reduced maintenance requirements, and growing charging infrastructure are all contributing to increased interest in electric vehicles.

While the upcoming FBT changes may alter some long-term calculations, the current exemption period still provides opportunities for businesses and employees planning ahead.

As with any major business or financial decision, cash flow remains an important consideration.

Whether businesses are upgrading operational assets, supporting employee benefit programs, or preparing for broader FY2027 planning, maintaining healthy cash flow provides greater flexibility during periods of financial change.

For some businesses, investing in new systems, vehicles, or employee programs can place temporary pressure on working capital, particularly when customer payments are delayed or funds remain tied up in unpaid invoices.

This is where stronger cash flow support can make a difference.

Businesses with improved access to working capital are often better positioned to manage operational expenses while still taking advantage of opportunities such as EOFY investments, fleet upgrades, or employee benefit improvements.

Healthy cash flow can help businesses:

• Manage operational expenses more comfortably
• Support employee benefit programs
• Upgrade business vehicles and systems
• Reduce pressure from delayed client payments
• Improve flexibility when planning future investments
• Prepare more confidently for FY2027

The period leading up to 2027 may also be a good opportunity for businesses to review broader financial strategies, including:

• Vehicle fleet planning
• Employee salary packaging options
• Operational budgeting
• Working capital management
• EOFY investment opportunities

While the upcoming FBT reforms introduce future changes, businesses still have time to assess current opportunities and determine what approach best suits their operational and financial goals.

Selectpay supports Australian businesses by helping improve access to working capital through invoice finance solutions. By unlocking cash tied up in unpaid invoices, businesses can strengthen cash flow flexibility and better manage operational decisions during changing financial conditions.

Whether your business is reviewing EV novated lease options, planning for FY2027, or preparing for future operational investments, stronger cash flow access can help provide greater financial confidence moving forward.

Want to improve your business cash flow while planning for future growth opportunities? Click here to learn how Selectpay can help your business maintain stronger working capital flexibility for FY2027 and beyond.