Changes to the novated lease EV discount give HR a rare window to make a lasting impact
Australian employees are under real financial pressure—and HR is feeling the consequences.
In just the first five months of 2026, employees have faced three RBA cash rate increases (February, March and May), while the war in the Middle East pushed petrol prices sharply higher. Average unleaded fuel rose from under $1.70 per litre in early February to more than $2.50 in March, turning transport into one of the most visible and stressful household expenses.
For many Australians, transport is now second only to housing in household costs.
Based on ABS household expenditure trends and motoring cost reports from RACV and NRMA, vehicle-related expenses—including finance, fuel, charging, rego, insurance, servicing, tolls and parking—typically represent 15–20% of total household spending. For outer suburban families with two cars and long commutes, that can rise to 25%.
A middle-income household earning $140,000 with two vehicles can easily spend $18,000–$28,000 per year on transport alone.
That matters for HR because financial stress directly affects workplace performance.
“Financially stressed employees are twice as likely to be disengaged, take more sick leave, experience burnout, and lose up to seven hours of productivity per week. Retention suffers. Productivity drops. Business costs rise,” says Greg Parkes, CEO of Auto-UX.
So what can HR do?
One of the most practical opportunities is helping employees reduce transport costs through novated leasing—particularly electric vehicles (EVs).
Change in legislation creates window of opportunity
Novated leasing has existed for decades, but the Federal Government’s 2022 EV Discount changed the game by making eligible EVs 100% FBT exempt.
“This means employees can pay for the full finance and running costs of an EV from pre-tax salary, dramatically increasing tax savings compared to a combustion engine vehicle,” says Parkes.
Following a government review in early 2026, the EV Discount has been extended—but with a phased reduction over the next three years.
Here’s how it now works:
- EVs under $75,000 remain fully FBT exempt until March 2029, then move to a reduced 15% statutory rate
- EVs between $75,000 and $91,000 remain FBT exempt only until March 2027, then also move to the 15% rate
- Combustion engine vehicles remain unchanged at the standard 20% statutory rate
The opportunity is strongest right now.
What this means in real dollars
For an employee earning $140,000, driving 10,000km annually, and leasing a vehicle worth $58,577:
Annual savings
- EV before March 2029: $7,645 per year
- EV after April 2029: $4,458 per year
- Combustion engine vehicle: $3,395 per year
That means an EV currently delivers an additional $4,250 per year in tax savings compared to a petrol vehicle. Even after 2029, the EV still remains more tax effective.
Over a five-year lease:
- EV with full discount: $38,225 saved
- Combustion engine vehicle: $16,975 saved
While a saving of $16,975 is nothing to be sneezed at, an additional saving of $21,000 is hard to ignore.
A strategic HR opportunity
This is where HR can make a genuine difference.
Helping employees understand and access novated leasing can materially reduce cost-of-living pressure, improve financial wellbeing, and support the transition to EVs.
Some employees are already acting strategically—taking a three-year fully FBT-free EV lease now, then switching it out for another EV lease again before March 2029 to lock in another five years of tax-effective savings.
That could mean up to eight years of significant financial relief (tax free driving until 2034!).
The business benefits are equally compelling.
Employees under less financial stress are more engaged, more productive, take fewer sick days and stay longer. “Every novated lease also reduces employer payroll tax exposure. The compounding effect of these factors has a quantifiable impact on bottom line business profitability, something that we have started to map and analyse for our clients,” says Parkes.
In summary, the combination of the cost-of-living crunch, the war in the Middle East, and its effect on fuel prices has created the perfect storm and a significant opportunity for HR to leverage the extension of the EV discount to drive financial relief for employees and make a sustained impact on bottom line profitability.
Download this whitepaper to see how industry leaders are leveraging technology to capitalise on the EV Discount and drive a step change in employee engagement, financial wellbeing and organisational profitability.
This article was produced in partnership with Auto-UX
