If you currently have a novated lease for a plug-in hybrid electric vehicle (PHEV), it’s important to understand how changes in your employment situation could affect the Fringe Benefits Tax (FBT) exemption that applies to your vehicle.

Under current regulations, the FBT exemption for PHEVs applies while the vehicle remains under the active novation agreement signed before 31 March 2025. This means that if your employment ends, or if the novated lease is transferred to a new employer, the exemption will unfortunately be lost. While you can transfer an existing lease to a new employer, any new deed of novation signed after the exemption end date of 31 March 2025 will be ineligible to continue under the FBT exempt status.

 In practical terms, your deductions under the FBT exemption were entirely pre-tax; however, if this exemption is lost, your deductions would need to be split into pre-tax and post-tax components. This would reduce the tax benefit of the arrangement and decrease your after-tax take-home pay. 

 If you are planning to change jobs, it’s essential to review your lease arrangement before finalising any employment changes. You may wish to discuss options such as transferring the lease to your new employer (subject to their approval) or restructuring the agreement to minimise potential FBT exposure.

Staying informed and proactive about these rules can help you avoid unexpected tax consequences and manage your lease obligations effectively. If still unsure we advise seeking independent financial advice prior to considering changes in employment.