PHEV novated leases: new eligibility rules from April 2025
Source: ATO
Plug-in hybrids are no longer classified as zero or low emissions vehicles for FBT purposes on new arrangements. Pre-existing binding commitments are protected.
From 1 April 2025, a plug-in hybrid electric vehicle (PHEV) is no longer considered a zero or low emissions vehicle under FBT law and is not eligible for the electric car exemption on new novated lease arrangements.
However, the ATO allows the exemption to continue where two conditions are met: the PHEV was used or available for use before 1 April 2025 (and that use was exempt), and there was a financially binding commitment before 1 April 2025 to continue providing the car for private use on and after that date.
Optional extensions to lease agreements exercisable on or after 1 April 2025 are not considered binding commitments. Changes to lease payments or residual values also constitute a new commitment, ending the exemption from that date.
If you are considering a PHEV novated lease today, assume standard FBT rules apply unless you can confirm grandfathering eligibility with your provider and employer.
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