Written byA BEV is a battery electric vehicle: a car driven entirely by an electric motor and a rechargeable battery, with no petrol or diesel engine on board.
Also known as: battery electric vehicle, full electric car, EV, electric car
Key points
- A BEV priced under the fuel-efficient luxury car tax threshold attracts no FBT when an employer provides it, so BEVs dominate novated leases.
- The exempt car is still a reportable fringe benefit, so it can affect income-tested surcharges and assessments even though no FBT is paid.
- Fewer moving parts mean cheaper servicing, but resale values have been volatile, so the residual value set on a lease matters more than usual.
- Home charging on off-peak power is the main running-cost saving; relying on public fast charging narrows the gap with petrol.
How a BEV differs from hybrids
A BEV has a battery, one or more electric motors and nothing to refuel. A conventional hybrid pairs a petrol engine with a small battery it charges itself; a plug-in hybrid adds a bigger battery you can charge from a socket but keeps the engine for longer trips. Hydrogen fuel cell cars are electric too, generating their power on board, and are treated the same way as BEVs for tax.
Range is set by battery size and driving conditions, and charging speed by the car and the charger: a home wall box overnight, or a public fast charger in well under an hour. For most owners the car leaves home full every morning and public charging is for road trips.
BEV tax rules
The headline is the FBT exemption. An electric car an employer provides for private use is exempt from fringe benefits tax if two tests are met: it was first held and used on or after 1 July 2022, and its price was under the luxury car tax threshold for fuel-efficient vehicles when first sold at retail and at every sale since. Plug-in hybrids dropped out of the exemption in April 2025; BEVs remain.
Two catches. The benefit is still reportable, so it appears on the employee's income statement and can affect things assessed on adjusted income. And the car limit on depreciation and GST credits applies to a BEV like any other car. The ATO also allows a per-kilometre shortcut for claiming the cost of home charging.
Financing a BEV
The FBT exemption made the novated lease the default way to get into a BEV through work, with salary sacrifice paying the lease and running costs from pre-tax salary. Outside employment, a BEV is financed on a car loan or a chattel mortgage, and several lenders offer a green loan rate for eligible electric cars.
Whatever the structure, the residual or balloon at the end of the term is where the risk sits. BEV resale values have swung with new-model pricing and battery technology, so a lease that assumes a high residual can leave the driver paying to hand the car back. Comparing lease versus buy with a conservative residual shows what the car really costs.
Example
A project manager in Canberra takes a mid-sized BEV on a three-year novated lease. The car's price is under the fuel-efficient luxury car tax threshold, so her employer pays no FBT on it, and the lease payments, insurance, charging and servicing come out of her pre-tax salary. The benefit still shows on her income statement as a reportable fringe benefit, which her accountant flags because it changes an income test she relies on. Before signing she asks the leasing company to show the residual value and what happens if the car is worth less than that at the end.
Not to be confused with
- PHEV
- a plug-in hybrid keeps a petrol engine alongside its battery and no longer qualifies for the FBT exemption
Frequently asked questions
Are electric cars FBT exempt in Australia?
Battery electric and hydrogen fuel cell cars are, provided the car was first held and used on or after 1 July 2022 and was below the luxury car tax threshold for fuel-efficient vehicles when first sold at retail and at every sale since. Plug-in hybrids lost the exemption from 1 April 2025 except under pre-existing binding commitments.
What is the difference between a BEV and a PHEV?
A BEV runs only on its battery and has no engine. A PHEV has a smaller battery you can plug in plus a petrol engine that takes over when the battery runs down. The BEV relies on charging and goes much further on electricity; the PHEV can run without a charger but lost the FBT exemption from April 2025.
Does the FBT exemption affect my tax?
Your employer pays no FBT, but the value of the benefit is still reported on your income statement as a reportable fringe benefit amount. That figure is not taxed as income, but it is added back for some income-tested purposes, such as the Medicare levy surcharge and child support assessments.
Do electric cars hold their value?
Less predictably than petrol cars so far. Falling new-car prices, fast-improving batteries and shifting incentives have pushed used BEV values down more sharply in some segments than others. That matters most on a lease, where the residual value is set at the start; a conservative residual protects you if the market moves against the car.
Can I get a green loan for an electric car?
Several lenders offer a discounted rate for cars that meet their definition of low or zero emissions, and a BEV usually qualifies. The definitions, the discount and the eligible price caps vary between lenders, and a green rate is not automatically the cheapest option once fees and terms are compared, so treat it as one quote among several.
Related terms
PHEV
A PHEV is a plug-in hybrid electric vehicle: a car with a petrol engine and a battery you charge from a socket, giving a limited electric-only range.
Read definitionFringe benefits tax (FBT)
Fringe benefits tax (FBT) is a tax employers pay on non-cash benefits given to employees, such as a work car available for private use.
Read definitionNovated lease
A novated lease is a three-way car lease where your employer takes over the lease payments and deducts them from your salary, mostly before tax, while you work there.
Read definitionLuxury car tax (LCT)
Luxury car tax (LCT) is a tax on cars whose GST-inclusive value is above the LCT threshold, charged only on the amount over the line and built into the price.
Read definitionSalary sacrifice
Salary sacrifice is an agreement with your employer to receive less salary in return for benefits paid from pre-tax pay, such as extra super or a novated lease.
Read definitionResidual value
Residual value is the amount a leased car or asset is expected to be worth when the lease ends, set at the start and used to calculate the rentals.
Read definitionGo deeper
Sources
This article is general information only and is not financial advice.