Novated Lease · Calculator

Novated Lease Calculator Australia (2026-27)

Work out the real cost of a novated lease — petrol, hybrid or EV — versus buying the same car outright. See pre-tax salary packaging savings, FBT, the Employee Contribution Method, and the ATO residual value you'll owe at the end of the term.

Petrol, hybrid & EVPre-tax savings + ECMvs private finance
01 —INPUTS

Amount financed or paid privately, including on-road costs.

Use the employer or lease quote value. Registration and stamp duty are excluded; dealer delivery and fitted accessories are generally included. Defaults to purchase price if blank.

FBT exemption: BEV/FCEV only; PHEVs eligible only with pre-1-Apr-2025 commitment.

Must be on/after 1 July 2022 for any exemption.

Used for the legislated 2027 and 2029 EV discount transition and grandfathering.

Enter the annual after-tax amount in your quote. It reduces the car's FBT taxable value dollar for dollar, up to that value.

RFBA from a novated lease adds to income-for-MLS purposes even when FBT is $0.

Residual: 28.13%

Finance & running-cost assumptions

Check your employer's policy or lease quote; salary packaging can reduce ordinary time earnings for SG.

02 —RESULTS
Awaiting input

Enter your salary and vehicle price to compare a novated lease with private finance

Edit inputs ↑
How a novated lease saves tax

A novated lease reduces your taxable income by paying for the car — lease payments, insurance, servicing, tyres and fuel or electricity — from your pre-tax salary. Because the car is available for private use, most vehicles also attract Fringe Benefits Tax (FBT) under the statutory formula: 20% of the car's price, grossed up and taxed at 47%. The Employee Contribution Method (ECM) is how you control that FBT bill: by making some of your payments from after-tax salary instead, you reduce the car's FBT taxable value dollar-for-dollar. Contribute enough — broadly, an amount equal to the statutory taxable value — and FBT payable drops to zero, leaving only the pre-tax income tax saving.

Pre-Tax Deduction

Lease + running costs come off your salary before income tax is calculated

FBT (unless exempt)

20% statutory formula, grossed up and taxed at 47% — this is what ECM offsets

Employee Contribution

After-tax payments that cut the FBT taxable value, dollar for dollar

Worked examples ($90,000 salary, $45,000 car, 5-year lease)

Figures below come from the calculator engine for a $90,000 salary, $45,000 car and a 5-year lease at 15,000 km/year. They assume an 8% lease comparison rate, a 7% private car-loan rate and no ECM. Both choices include finance, running costs and the lease residual.

Petrol car, novated lease

  • Pre-tax lease + running costs: $14,942/year
  • Tax saved from salary packaging: $4,781/year
  • FBT payable (no ECM, no exemption): $8,799/year
  • Annualised cost including residual: $23,284/year
  • vs buying the same car with a loan: $16,753/year

Novated lease costs ~$6,532/year MORE than buying outright — FBT outweighs the pre-tax saving here. This is exactly what ECM is for.

Same car, as an eligible EV

  • Pre-tax lease + running costs: $12,757/year
  • Tax saved from salary packaging: $4,082/year
  • FBT payable: $0 (100% exempt, no ECM needed)
  • Annualised cost including residual: $12,737/year
  • vs buying the same EV with a loan: $14,568/year

Novated lease saves ~$1,830/year vs buying outright.

ATO minimum residual (balloon) value by lease term

The residual is the minimum amount you must still owe at the end of the lease as a percentage of the car's original price — shorter leases carry a higher residual because less of the car's value has been paid off.

Lease termATO minimum residual
1 year65.63%
2 years56.25%
3 years46.88%
4 years37.5%
5 years28.13%
Buying an EV instead?

Buying an EV? The EV version of this calculator walks through eligibility, the luxury car tax threshold, separate first-use and arrangement dates, and the legislated discount transition. Also see the Car FBT Calculator for the statutory vs operating-cost method on any employer-provided car, and the Salary Sacrifice Calculator for non-super items beyond cars.

FAQ
What is a novated lease?
A novated lease is a three-way agreement between you, your employer and a finance company. Your employer deducts the lease payments (and usually running costs) from your salary before tax, then makes the payments on your behalf. This cuts your taxable income, while you keep using the car for both work and private purposes. If you change employers, the arrangement can be 'novated' to your new employer or reverts to a standard car loan in your own name.
How does the Employee Contribution Method (ECM) offset FBT?
Most novated leases attract Fringe Benefits Tax (FBT) because the car is available for private use. The Employee Contribution Method lets you make part of your lease payments from after-tax salary instead of pre-tax salary. Those post-tax contributions reduce the car's FBT taxable value dollar-for-dollar — contribute enough (typically ~20% of the car's value each year under the statutory formula) and the FBT taxable value, and therefore the FBT payable, drops to zero. The trade-off is a smaller pre-tax deduction, so ECM works best when the FBT saved is larger than the extra tax you'd otherwise pay on that portion of salary.
What is the statutory formula and why is it 20%?
The statutory formula values a car fringe benefit at 20% of the car's base value (GST-inclusive purchase price including dealer delivery), pro-rated for days available for private use, minus any employee contribution. This flat 20% rate has applied since 1 April 2014 regardless of kilometres travelled. The taxable value is then grossed up (2.0802 for Type 1 benefits where GST credits are claimed) and taxed at the FBT rate of 47%.
What happens at the end of a novated lease?
At the end of the lease term you owe the residual (balloon) value — an ATO-set minimum percentage of the vehicle's original price that increases as the term shortens (see the residual table above). You can pay out the residual and keep the car, trade it in and use any equity toward a new lease, or hand the car back if the finance agreement allows it. Underestimating the car's resale value relative to the residual is the most common way a novated lease ends up costing more than expected.
Are electric vehicles treated differently in a novated lease?
Yes. Eligible battery-electric and hydrogen fuel-cell cars can receive the Electric Car Discount if luxury car tax has never been payable; limited PHEV grandfathering can also apply. The statutory rate depends on the arrangement date and vehicle value under the legislated 2027 and 2029 transition. See the EV Novated Lease Calculator for the date and value tests.
Is a novated lease better than a car loan?
It depends on your marginal tax rate, the car's FBT exposure, and whether you use ECM. A novated lease's pre-tax deduction can outweigh a standard car loan for higher-income earners with an FBT-exempt EV, or with ECM applied. For a mainstream petrol car without ECM, FBT can offset most or all of the pre-tax saving, and a plain car loan (with full ownership and no employer dependency) may come out ahead. Compare both directly with the Car Loan Repayment Calculator.
Does a novated lease affect my HELP repayments or Medicare Levy Surcharge?
Yes, even when FBT payable is $0 or reduced by ECM. Your employer must still report the grossed-up notional taxable value as a Reportable Fringe Benefits Amount (RFBA) — using the Type 2 gross-up rate (1.8868) — on your income statement. RFBA is added to income for HELP/HECS repayment calculations, the Medicare Levy Surcharge income test, Division 293 super tax, and family payment tests, so a novated lease can push you into a higher HELP repayment band or MLS tier even while cutting your take-home pay deductions.

Tax Accuracy & Sources

Reviewed: March 2026 · Tax year: 2026-27

Estimates novated lease and private-finance costs using the entered comparison rates, ATO minimum residual, pre-tax deductions, ECM, FBT/RFBA and an optional SG adjustment. Running costs are editable estimates. It does not model provider fees, GST credits/refunds, days unavailable for private use, resale value, or a lender's exact quote.

Related calculators

EV Novated Lease Calculator FBT-exempt electric vehicle savings Car FBT Calculator Statutory vs operating-cost method Salary Sacrifice Calculator Non-super salary packaging Car Loan Repayment Calculator Compare buying with a straight car loan