Australia Novated Lease Calculator
A novated lease lets you pay for your car from pre-tax salary — reducing your taxable income and saving on GST. Enter your vehicle price, salary and lease term to see your real out-of-pocket cost, annual tax saving, and how it compares to a standard car loan.
Enter Your Vehicle & Lease Details
Add your vehicle price and lease term to see your ATO minimum residual and whether your EV qualifies for FBT exemption.
Set Your Salary & Running Costs
Enter your gross salary and package your running costs — fuel, insurance, rego and servicing — all paid pre-tax.
See Your Tax Saving & Net Cost
Get your fortnightly salary sacrifice, annual tax saving, GST benefit, and full comparison against a standard car loan.
Novated Lease Calculator
Salary Sacrifice · Tax Saving · FBT · ATO Residuals · 2025-26
Vehicle Details
FBT Exempt Electric Vehicle?
Battery EVs and hydrogen fuel cell vehicles under the $89,332 LCT threshold are fully FBT exempt. PHEVs are no longer exempt from 1 April 2025. Per ATO.
Your Salary
Lease Interest Rate
Running Costs in Package
All running costs below are included in your pre-tax salary sacrifice, maximising your tax saving. Adjust to reflect your actual expected costs. Per ATO, these are deductible car expenses.
Novated Lease Summary
Based on a $60,000 vehicle over 5 years at 7.00% p.a. on a salary of $100,000.
Your fortnightly salary sacrifice is $0. The annual tax saving is $0. After your post-tax ECM contribution, the net annual out-of-pocket is $0.
ATO — Car Fringe Benefits & Novated Leases | ATO FBT Rate 2025-26 (47%) | ATO Income Tax Rates 2025-26
Last verified: March 2026
Year-by-Year Lease Schedule
How the lease balance reduces each year, showing the split between interest paid to the finance company and principal reduction. The ATO residual value remains as the balloon payment at the end of the term.
| Year | Opening Balance | Annual Lease Payments | Interest | Principal Paid | Closing Balance |
|---|---|---|---|---|---|
| Calculating… | |||||
Tax Saving Breakdown
The salary sacrifice reduces your taxable income, saving income tax at your marginal rate. The higher your salary, the greater the benefit. Figures use ATO 2025-26 income tax rates including 2% Medicare levy.
Income Tax Comparison
ATO 2025-26 Income Tax Brackets
| Income Range | Tax Rate | Applies to You? |
|---|
FBT & Employee Contribution Method (ECM)
FBT rate 2025-26: 47%. Statutory formula fraction: 20% (flat rate, all vehicles post-2011). Source: ATO FBT rate.
ATO Income Tax Rates 2025-26 | ATO FBT Rate 2025-26 (47%) | ATO — Medicare Levy (2%)
Last verified: March 2026
Running Costs in Package
Running costs included in your novated lease package are paid from pre-tax salary, giving you a tax saving on every dollar of car expenses. This is one of the most underappreciated benefits of salary packaging. Per the ATO, these are deductible car expenses associated with the novated lease.
Cost Breakdown
At your marginal rate, including running costs in the package saves you approximately $0 in income tax per year on your car expenses alone. This is on top of the tax saving on your lease payments.
Novated Lease vs Car Loan
How your novated lease compares against taking a standard car loan and paying all costs from after-tax salary. Both options finance the same vehicle over the same term — the novated lease uses pre-tax income and packaging, the car loan uses after-tax income.
Side-by-Side Comparison
| Metric | Novated Lease | Car Loan | NL Saving |
|---|---|---|---|
| Annual tax saving | — | $0 | — |
| GST saving (one-off) | — | $0 | — |
| Net annual out-of-pocket | — | — | — |
| Total over term (incl. residual) | — | — | — |
Calculating comparison…
Car loan comparison uses an average rate of 8.50% p.a. (per RBA lending rate statistics) on the vehicle price ex-GST (no GST saving without employer involvement). Running costs are identical in both scenarios — the difference is whether they are paid pre-tax (NL) or after-tax (car loan). Tax calculations use ATO 2025-26 income tax rates.
For educational purposes only. This calculator provides estimates based on publicly available ATO rates and formulas. Actual novated lease costs will depend on the specific provider, finance rate, administration fees, and your employer's salary packaging arrangements. FBT calculations use the statutory formula method with ECM.
Income tax calculations include the 2% Medicare levy but exclude the Medicare Levy Surcharge (MLS), Low Income Tax Offset (LITO), and Low and Middle Income Tax Offset (LMITO — phased out). Always consult a registered financial adviser or tax agent before entering a novated lease arrangement.
Financing a vehicle? Compare dedicated car loan repayments against a personal loan — including balloon payment options — to find the most cost-effective path.
How a Novated Lease Works
The three-way arrangement between employee, employer and finance company
A novated lease is a three-way arrangement between an employee, their employer, and a finance company. The employer leases a vehicle on the employee's behalf and deducts the repayments — and optionally all running costs — from the employee's pre-tax salary. This reduces taxable income, saving income tax. According to the ATO, the benefit is treated as a car fringe benefit, subject to FBT — unless the Employee Contribution Method (ECM) is used or the vehicle is a qualifying EV.
Drives the car
Salary sacrificed pre-tax
Deducts from payroll
Signs novation deed
Owns vehicle
Provides lease finance
| Feature | How It Works |
|---|---|
| Pre-tax salary sacrifice | Lease repayments and running costs are deducted before PAYG tax is calculated — directly reducing your taxable income each pay period |
| GST saving on purchase | The employer claims back the GST (1/11th) on the vehicle purchase price. This saving is passed to you, effectively reducing the vehicle's cost |
| GST saving on running costs | GST on fuel, servicing, insurance, and tyres is also claimable by the employer and passed through, reducing your total running cost |
| FBT liability | The car fringe benefit creates an FBT liability calculated at 20% of base value × 47% FBT rate. Typically eliminated by the ECM post-tax contribution |
| Residual value | At lease end, you can buy the car at the ATO minimum residual value, re-lease a new vehicle, or refinance the balloon payment |
| Portability | If you change employers, the novation deed can be transferred to your new employer — or you take over the lease personally at the outstanding balance |
✓ Advantages
- ✓Reduces taxable income — benefit grows at higher marginal rates
- ✓GST saving on vehicle purchase (1/11th of drive-away price)
- ✓Running costs paid pre-tax — fuel, insurance, rego, tyres, servicing
- ✓One fixed fortnightly deduction covers all car costs — no surprise bills
- ✓BEV and hydrogen vehicles are fully FBT exempt (below LCT threshold)
✗ Considerations
- –Requires employer participation — not all employers offer it
- –Lower reported salary may reduce mortgage borrowing capacity
- –Balloon residual payment due at lease end
- –Early termination fees may apply if you leave employer mid-lease
- –ECM post-tax payment required for non-EV vehicles to eliminate FBT
Source: ATO — Car Fringe Benefits | ASIC MoneySmart — Salary Packaging
FBT, Employee Contribution Method & Statutory Formula
How FBT is calculated and how ECM eliminates it — ATO 2025-26
Fringe Benefits Tax is a tax paid by employers on benefits provided to employees. For novated leases, the statutory formula method applies. FBT is calculated at 47% (2025-26) on the taxable value of the car benefit. The most common way to eliminate FBT is the Employee Contribution Method (ECM) — a post-tax contribution matching the FBT taxable value, reducing the liability to zero. Source: ATO FBT Rates.
The taxable value under the statutory formula method — applied to all novated leases post-2011 regardless of kilometres driven.
Base value = purchase price including GST, excluding rego and stamp duty. 20% flat statutory fraction applies to all vehicles.
The gross FBT payable by the employer before any employee post-tax contribution. This is what the ECM is designed to fully eliminate.
FBT rate = 47% in 2025-26, matching the top marginal income tax rate + Medicare levy. Source: ATO FBT Rates.
The post-tax amount the employee must contribute to reduce FBT liability to zero under the Employee Contribution Method.
ECM equals the FBT taxable value. When ECM ≥ taxable value, FBT is fully eliminated. Deducted after-tax in each pay period.
The actual benefit after the pre-tax sacrifice and the after-tax ECM. The saving grows with your marginal rate.
At 37–47% marginal rates the pre-tax saving exceeds the ECM, producing a meaningful net benefit. EV = no ECM at all.
| Gross Salary | Marginal Rate | Annual Sacrifice | ECM (non-EV) | Annual Tax Saving | Net Benefit |
|---|---|---|---|---|---|
| $60,000 | 32.5% | $15,000 | $12,000 | $4,875 | $4,875 |
| $80,000 | 32.5% | $15,000 | $12,000 | $4,875 | $4,875 |
| $100,000 | 37% | $15,000 | $12,000 | $5,550 | $5,550 |
| $140,000 | 37% | $15,000 | $12,000 | $5,550 | $5,550 |
| $200,000+ | 47% | $15,000 | $12,000 | $7,050 | $7,050 |
Example: $60,000 vehicle, 5-year lease. Annual sacrifice = lease + running costs. ECM = 20% × $60,000. Tax rates per ATO 2025-26.
Low income earners: Novated leases are less attractive below ~$45,000 salary. At the 19% marginal rate the pre-tax saving may not significantly exceed the ECM obligation. Also note that a lower reported salary can affect Family Tax Benefit assessments, HECS/HELP repayment thresholds, and other income-tested benefits. Per ASIC MoneySmart.
Source: ATO — FBT Rates 2025-26 (47%) | ATO — Car Fringe Benefits
EV FBT Exemption
Battery EVs and hydrogen fuel cell vehicles — fully FBT exempt below the LCT threshold
Since 1 July 2022, eligible zero and low-emission vehicles provided through a novated lease are fully exempt from FBT — meaning no ECM post-tax contribution is required. The full pre-tax salary sacrifice goes to lease and running costs with zero FBT liability. Source: ATO — Electric and Low-Emission Vehicles.
| Vehicle Type | FBT Status | LCT Threshold 2025-26 | Notes |
|---|---|---|---|
| Battery Electric Vehicle (BEV) | ✓ Exempt | ≤ $89,332 | Fully FBT exempt — no ECM required. Drive-away price (GST inclusive) must be at or below the LCT threshold for low-emission vehicles. |
| Hydrogen Fuel Cell Vehicle | ✓ Exempt | ≤ $89,332 | Same exemption as BEV. Very limited models currently available in Australia. |
| Plug-in Hybrid (PHEV) | ✗ Not Exempt | N/A | PHEVs lost FBT exemption from 1 April 2025. Orders with binding contracts entered before that date remain exempt for the duration of the original lease only. |
| Mild Hybrid / Petrol / Diesel | ✗ Not Exempt | N/A | Standard FBT applies. ECM post-tax contribution required to eliminate FBT liability. |
Source: ATO — Electric & Low-Emission Vehicles | ATO — LCT Threshold 2025-26 ($89,332)
ATO Minimum Residual Values
The minimum balloon payment at the end of each lease term — set by the ATO
The ATO sets minimum residual values — the lowest permitted balloon payment at the end of a novated lease. Setting the residual below the ATO minimum would classify the arrangement as a deemed purchase rather than a lease. In practice, most novated lease providers use exactly the ATO minimum. Source: ATO Residual Value Percentages.
| Lease Term | ATO Min. Residual | On a $60,000 vehicle | On an $80,000 vehicle |
|---|---|---|---|
| 1 year | 65.63% | $39,375 | $52,500 |
| 2 years | 56.25% | $33,750 | $45,000 |
| 3 years | 46.88% | $28,125 | $37,500 |
| 4 years | 37.50% | $22,500 | $30,000 |
| 5 years | 28.13% | $16,875 | $22,500 |
🚗 Buy the Car
Pay the residual balloon to own the vehicle outright. You can then keep, sell, or trade it privately.
🔄 Re-Lease a New Car
Return the car and start a new novated lease on a new vehicle — restarting the tax-saving cycle.
💳 Refinance the Residual
Finance the balloon separately via a car loan if you want to keep the car but can't pay the residual upfront.
Source: ATO — Residual Value Percentages
Novated Lease vs Car Loan
Key differences in tax treatment, GST, running costs, and total cost of ownership
The central advantage of a novated lease over a standard car loan is that repayments are made from pre-tax salary, not after-tax income — meaning you pay less tax to drive the same car. The benefit depends on your marginal tax rate and whether running costs are included in the package. Per ASIC MoneySmart.
| Feature | Novated Lease | Car Loan |
|---|---|---|
| Repayments from | Pre-tax salary | After-tax income |
| GST on vehicle | Claimable (1/11th) | Paid in full |
| Running costs | Pre-tax (fuel, rego, etc.) | After-tax only |
| FBT | ECM required for non-EV. BEV = fully exempt. | Not applicable |
| Ownership | Finance company owns during lease. Residual at end. | You own from day one (lender holds security) |
| Employer required | Yes | No |
| Best for | Employees earning $80,000+, especially EV buyers | Self-employed, or where employer doesn't offer salary packaging |
Worked example: A $60,000 BEV (FBT exempt) on a 5-year novated lease at a $100,000 salary saves approximately $5,500/year in income tax plus a $5,455 GST saving on the vehicle — totalling approximately $33,000 over 5 years vs an equivalent after-tax car loan. Running costs packaged pre-tax add a further ~$2,700/year in tax saving. Use our Novated Lease Calculator to model your exact figures.
ATO — Car Fringe Benefits | ATO — FBT Rate 2025-26 (47%) | ATO — EV FBT Exemption | ASIC MoneySmart — Salary Packaging
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