Written byA 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.
Also known as: plug-in hybrid, plug-in hybrid electric vehicle, PHEV car
Key points
- Unlike a regular hybrid, a PHEV does a commute on battery alone; unlike a full electric car, it is never stuck without a charger.
- PHEVs lost the FBT exemption for electric cars from 1 April 2025, unless a binding novated lease or similar commitment was already in place.
- A PHEV gets the higher fuel-efficient luxury car tax threshold only if its official combined figure meets the tightened 2025 definition; most still do.
- Running costs depend on charging habits: a PHEV that is rarely plugged in is a heavy petrol car carrying a battery.
How a PHEV works
A PHEV carries a battery a fraction the size of a full electric car's, big enough for tens of kilometres of electric driving, plus a conventional engine. Charged overnight at home, it can do the school run and the commute without burning fuel, then switch to petrol on a longer trip. Braking recovers some energy, and the engine can top the battery up on the move, though far less efficiently than a wall socket.
Servicing looks like a petrol car's, because it is one, with the battery and electric motor on top. Fuel economy figures quoted for PHEVs assume a full charge at the start of each trip, which is why real-world consumption, and the total cost of ownership, varies so much between owners.
PHEV tax rules
For a few years PHEVs shared the FBT exemption that made electric cars so attractive on a novated lease. That ended on 1 April 2025: a PHEV is no longer a zero or low emissions vehicle under FBT law. The exemption survives only where the car was already being provided before that date under a financially binding commitment that continues unchanged; alter the arrangement and the exemption ends from that day.
The luxury car tax rules moved as well. The fuel-efficient threshold, which is higher than the standard one, now demands a much lower official fuel figure. Most PHEVs still meet it on their combined rating, because that rating assumes a charged battery, but conventional hybrids generally do not, so the model's official figure decides it. The car limit on depreciation applies as it does to any car.
Financing a PHEV
A PHEV is financed like any other car, on a car loan, a chattel mortgage for business use or a novated lease through an employer. Some lenders offer a green loan rate for low-emission vehicles, and their definitions of what qualifies vary, so it is worth asking. Without the FBT exemption the novated lease case for a PHEV now rests on the same arithmetic as a petrol car.
The number to watch is the residual value. Resale prices for PHEVs have been uneven as the market works out how battery age and the tax changes affect demand, and a lease with an optimistic residual leaves the driver exposed at the end of the term.
Example
A physiotherapist in Albury took a PHEV on a novated lease in 2024, when the FBT exemption still applied to plug-in hybrids. Because her lease was a binding commitment in place before 1 April 2025 and nothing about it has changed, her employer keeps the exemption for the rest of the term. A colleague starting a new lease in 2026 looks at the same model and finds the exemption no longer applies to it, so the salary packaging saving shrinks to the GST and running-cost benefits. He compares a battery electric alternative that is still exempt before deciding.
Not to be confused with
- BEV
- a battery electric vehicle has no engine at all and still qualifies for the FBT exemption
Frequently asked questions
Is a PHEV still FBT exempt?
Generally no. From 1 April 2025 plug-in hybrids are not treated as zero or low emissions vehicles for FBT, so a new PHEV provided to an employee attracts FBT like a petrol car. The exception is a PHEV that was already exempt before that date under a binding commitment, such as an existing novated lease, that has continued without change.
What is the difference between a PHEV and a hybrid?
A conventional hybrid has a small battery charged only by the engine and braking, and cannot be plugged in; it uses electric power in short bursts to cut fuel use. A PHEV has a larger battery you charge from a socket and can drive meaningful distances on electricity alone before the engine is needed.
Do PHEVs pay luxury car tax?
Only if priced above the threshold that applies to them. The fuel-efficient threshold is higher, and since 2025 its fuel economy test is stricter; most PHEVs still pass on their official combined figure, but it is worth confirming for the model. Below the relevant threshold there is no LCT; above it, tax is charged on the amount over the line.
How far can a PHEV go on electric power?
Typically enough for a daily commute and errands, measured in tens of kilometres rather than the hundreds a battery electric car manages. The exact figure depends on the model, the battery size, the weather and how the car is driven. Once the battery is depleted the petrol engine takes over and range is limited only by the fuel tank.
Do you have to plug in a PHEV?
No. It will run as a conventional hybrid, with the engine and brakes charging the battery a little. But that defeats the point: an unplugged PHEV hauls a heavy battery for no benefit and usually returns worse fuel economy than a regular hybrid. The savings, and the fuel figures in the brochure, assume it is charged most nights.
Related terms
BEV
A 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.
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.