Is the 5% Deposit Scheme still capped in 2026?

As of late 2025, the Australian Government removed the volume limits and income caps for the 5% Deposit Scheme (First Home Guarantee). Eligible buyers with a steady income can now access the scheme without the previous 'first-in, best-dressed' anxiety.

Can an EV novated lease help with a home loan application?

Yes. Because eligible EVs are FBT-exempt in 2026, packaging one through a novated lease reduces your taxable income. While banks still view the lease as a liability, the significant increase in disposable income can help satisfy serviceability requirements when structured correctly.

Are hybrid cars (PHEVs) still tax-exempt in 2026?

No. The FBT exemption for Plug-in Hybrid Electric Vehicles (PHEVs) phased out on April 1, 2025. To benefit from the current tax-free incentives in 2026, buyers must opt for a Full Battery Electric Vehicle (BEV).

How to Buy a Home with a 5% Deposit and a Tax-Free EV

24 February 2026

First Home Buyer 2026 Update: Navigating the 5% Deposit Scheme while Driving a Tax-Free EV

The Australian dream is getting a tech-savvy makeover. In 2026, the path to home ownership is no longer just about cutting out avocado toast; it is about leveraging federal tax exemptions to offset a mortgage. With the 5% Deposit Scheme entering a new, uncapped phase and the Electric Car Discount still in full swing, first-time buyers are finding they can move into a new home and a new EV simultaneously without blowing their debt-to-income ratio.

1. The 2026 Housing Landscape: Uncapped and Unfiltered

The biggest shift this year is the removal of the first-in, best-dressed anxiety. Regarding the 5% Deposit Scheme, the government removed income caps and volume limits as of late 2025. If you have 5% saved and a steady income, the government guarantees the remaining 15%, saving you up to $35,000 in Lenders Mortgage Insurance. Furthermore, regional and metro property price caps have been adjusted upward to reflect 2026 market realities, meaning more suburbs are back on the menu for first-time buyers.

2. The Double Benefit Strategy: Why an EV Fits the Budget

It sounds counterintuitive to get a new car while saving for a house, but the 2026 Novated Lease math tells a different story. Eligible EVs under the $91,387 Luxury Car Tax threshold remain exempt from Fringe Benefits Tax, providing a unique loophole for middle-income earners. By packaging an EV through a novated lease, your car payment, electricity, insurance, and maintenance are deducted from your pre-tax salary. This creates a disposable income boost because you are not paying income tax on the money used for your car. Consequently, your take-home pay can actually increase compared to owning a petrol car out-of-pocket, helping you meet the serviceability requirements for your 95% home loan.

3. Case Study: The 2026 Starter Pack

FeatureTraditional RouteThe 2026 StrategyHousing Deposit20% ($120k on a $600k home)5% ($30k on a $600k home)Vehicle5-year-old Petrol SUVNew BYD Atto 2 or Tesla Model YCar Expenses$250/wk (After-tax)$180/wk (Pre-tax via Novated Lease)Tax ImpactFull Income Tax paidSignificant taxable income reduction

4. Critical Checks Before You Sign

While the stars are aligned, 2026 buyers must navigate two specific hurdles to ensure their home loan remains viable:

The Debt-to-Income (DTI) Ratio: Even though a lease is tax-effective, banks still view it as a liability. It is crucial to set up the lease after your mortgage pre-approval or work with a broker who understands how to add back those tax savings into your borrowing power.
PHEV Phase-Out: Be mindful that Plug-in Hybrids (PHEVs) lost their FBT-exempt status in April 2025. To get the tax-free home-buying boost, you must go Full Battery Electric (BEV).

Summary: The 2026 Flex

The goal for 2026 is not just to own a home; it is to own a home that does not force you into a decade of lifestyle poverty. By combining the 5% Deposit Scheme with an FBT-exempt EV, you are essentially using the tax man’s share of your salary to fund your commute, leaving your hard-earned savings to grow your equity.