Novated lease calculator
See what a salary-packaged car actually costs you a year, and how that compares with buying the same car outright.
The calculator
A novated lease is a three-way arrangement between you, your employer and a financier: your employer pays the car and its running costs out of your salary before tax, which lowers the income tax you pay. Put your own numbers in below to see what that leaves you paying.
Before any salary sacrifice, and not counting employer super.
Including GST, on-road costs and any dealer extras.
Fuel or charging, insurance, rego, servicing, tyres.
The rate your financier quotes on the lease.
This is an estimate, not financial or legal advice.
The rates
The rates behind this calculation
| FBT rate | 47% |
| Statutory fraction Applied to the car's base value, whatever the distance travelled | 20% |
| Type 1 gross-up factor Used where the employer can claim the GST credit, as on a car | 2.0802 |
| Type 2 gross-up factor Used where no GST credit is available, and for the reportable amount | 1.8868 |
| Lease term | Minimum residual | On a $45,000 car |
|---|---|---|
| 1 year | 65.63% | $29,534 |
| 2 years | 56.25% | $25,313 |
| 3 years | 46.88% | $21,096 |
| 4 years | 37.5% | $16,875 |
| 5 years | 28.13% | $12,659 |
These are the ATO minimums for a car. A shorter lease leaves a much larger sum owing at the end, so a low monthly payment on a one or two year term is not the saving it looks like. Your financier may set a residual higher than the minimum, but not lower without evidence the car will be worth less.
The electric car exemption
| Price threshold | $91,661 |
| Cars that qualify | Battery electric, hydrogen fuel cell |
| First held and used on or after | 1 July 2022 |
Battery electric and hydrogen fuel cell cars are exempt from FBT for the whole FBT year to 31 March 2027, provided the car was first both held and used on or after 1 July 2022 and luxury car tax has never been payable on it — that is, it stayed under the $91,661 fuel-efficient threshold when first sold and at every later sale. Plug-in hybrids stopped counting as low emissions cars on 1 April 2025 and only remain exempt where the car was already in use before that date under a financially binding commitment. The government has announced that from 1 April 2027 the full exemption will be limited to electric cars costing $75,000 or less, with dearer cars still under the luxury car tax threshold receiving a 25% discount on FBT instead. Cars already under a lease keep the treatment that applied when the arrangement started.
Worked example
Two leases, worked through in full
A $45,000 petrol car on a $90,000 salary
A five-year lease at 7.5%, with $6,000 a year of running costs, and enough paid from after-tax salary to cancel the fringe benefits tax.
| Financed amount Vehicle price less GST claimed by the employer | $40,909 |
| Residual owing at end of term 28.13% of the price, the ATO minimum for a 5-year lease | $12,659 |
| Annual finance cost | $7,933 |
| Annual running costs (ex GST) | $5,455 |
| Total packaged cost per year | $13,387 |
| FBT taxable value 20% statutory fraction × 365 days available | $0 |
| FBT payable Grossed up at 2.0802 and taxed at 47% | $0 |
| Deducted from pre-tax salary | $4,387 |
| Deducted from post-tax salary | $9,000 |
| Income tax saved | $1,404 |
| Net cost per year | $11,983 |
Buying the same car outright costs $14,726 a year from after-tax pay, so the lease leaves this driver $2,743 a year better off. The fringe benefits tax comes to nil because the $9,000 paid from after-tax salary cancels the taxable value — the tax saving is what is left over.
A $65,000 electric car on the same salary
The same term and rate, with $4,000 a year of running costs. The car is under the $91,661 threshold, so no fringe benefits tax applies and nothing needs to be paid from after-tax salary.
| Financed amount Vehicle price less GST claimed by the employer | $59,091 |
| Residual owing at end of term 28.13% of the price, the ATO minimum for a 5-year lease | $18,285 |
| Annual finance cost | $11,458 |
| Annual running costs (ex GST) | $3,636 |
| Total packaged cost per year | $15,095 |
| FBT taxable value Battery electric and hydrogen fuel cell cars are exempt from FBT for the whole FBT year to 31 March 2027, provided the car was first both held and used on or after 1 July 2022 and luxury car tax has never been payable on it — that is, it stayed under the $91,661 fuel-efficient threshold when first sold and at every later sale. Plug-in hybrids stopped counting as low emissions cars on 1 April 2025 and only remain exempt where the car was already in use before that date under a financially binding commitment. The government has announced that from 1 April 2027 the full exemption will be limited to electric cars costing $75,000 or less, with dearer cars still under the luxury car tax threshold receiving a 25% discount on FBT instead. Cars already under a lease keep the treatment that applied when the arrangement started. | $0 |
| FBT payable Grossed up at 2.0802 and taxed at 47% | $0 |
| Deducted from pre-tax salary | $15,095 |
| Deducted from post-tax salary | $0 |
| Income tax saved | $4,830 |
| Net cost per year | $10,264 |
The whole $15,095 comes out of pre-tax salary, saving $4,830 in income tax. Against $16,604 a year to buy the same car outright, the lease is $6,340 a year better — a bigger gap than the petrol car, on a dearer car, because there is no fringe benefits tax to cancel out.
How it's worked out
How this is calculated
The lease is amortised down to the residual rather than to zero, so the yearly finance cost covers only the part of the car you actually pay off during the term. Because your employer can claim the GST back on the car and its running costs, you are financing the price without GST — which is where a chunk of the benefit comes from before tax is even considered.
Where the car is not exempt, fringe benefits tax is worked out with the statutory formula: the base value times 20%, scaled by the days it was available for private use, less anything you pay from after-tax salary. That value is grossed up by 2.0802 and taxed at 47%. Paying the taxable value from your own after-tax money brings it to nil, which is almost always cheaper than letting the FBT be charged and paid from your pre-tax salary instead.
Whatever is left is deducted from your salary before tax. The calculator works out your income tax and Medicare levy with and without that deduction, and the difference is your saving. The comparison figure finances the same car at the same rate on its GST-inclusive price and pays the running costs with GST, all from after-tax income — which is what buying it outright actually involves.
What this assumes
- Salary is the amount before any sacrifice and excludes employer super.
- The residual is the ATO minimum for the term; your financier may set a higher one.
- Running costs are your estimate, not a quote. Insurance and tyres in particular vary widely.
- Assumes the employer passes on the GST input tax credit, which most but not all do.
- Ignores the Medicare levy surcharge, HELP repayments, and any employer administration fee.
Read before you rely on this
What this does not account for
- A reportable fringe benefit raises your adjusted taxable income. That can increase compulsory HELP or student loan repayments, reduce family assistance, and affect child support — none of which is modelled here. An exempt electric car is still reportable.
- The Medicare levy surcharge is not included. If you are close to its threshold, a salary sacrifice can change whether you pay it.
- Employer and packager administration fees are not included, and they vary from a few hundred dollars a year upwards.
- Insurance, tyres and servicing are your estimate, not a quote. They are the figures most likely to be understated in a packager’s proposal.
- The calculator assumes your employer offers novated leasing and passes on the GST input tax credit. Not every employer does either.
- The residual used is the ATO minimum. Your financier may require a higher one, which lowers the yearly cost but increases the lump sum at the end.
- Rates apply to the FBT year ending 31 March 2027. The electric car exemption changes from 1 April 2027, so a lease starting after that date will be treated differently.
Questions
Common questions
- How does a novated lease save tax?
- Your employer pays the lease and running costs out of your salary before income tax is worked out, so your taxable income drops and you pay less tax. On a petrol or diesel car that saving is partly offset by fringe benefits tax, which is usually cancelled by paying part of the cost from your after-tax pay. On an eligible electric car there is no FBT at all, so the whole pre-tax saving stays with you. The GST on the car and on its running costs is also claimed back by your employer, so you are financing the price without GST.
- What is FBT on a novated lease?
- A car provided through salary packaging is a fringe benefit, and the employer pays fringe benefits tax on it. Under the statutory formula the taxable value is 20% of the car's base value, adjusted for the days it was available for private use. That value is grossed up by 2.0802 and taxed at 47%. Anything you contribute from your after-tax pay reduces the taxable value dollar for dollar, which is why most packages are set up to bring it to nil.
- Are electric cars FBT-free on a novated lease?
- For the FBT year to 31 March 2027, yes — a battery electric or hydrogen fuel cell car is exempt from FBT if it was first held and used on or after 1 July 2022 and luxury car tax has never been payable on it, which means it stayed under the $91,661 fuel-efficient threshold when first sold and at every sale since. Plug-in hybrids stopped qualifying on 1 April 2025 unless the car was already in use before that date under a binding commitment. The government has announced that from 1 April 2027 the full exemption will apply only to electric cars costing $75,000 or less, with dearer cars under the threshold getting a 25% FBT discount instead. Cars already on a lease keep the treatment they started with.
- What is a residual or balloon payment?
- It is the lump sum still owing on the car when the lease ends. The ATO sets minimum residuals so that a lease is not used to write a car off faster than it really depreciates. For a car they are 65.63% of the original price after one year, 56.25% after two, 46.88% after three, 37.50% after four and 28.13% after five. The shorter the lease, the bigger the residual — so a short lease has lower monthly payments but leaves much more to find at the end. When the term is up you can pay it out, refinance it, or sell the car and settle the balance.
- Does a novated lease affect my HECS or HELP debt?
- It can, and this calculator does not model it. Where FBT applies and the taxable value of your benefits is more than $2,000, the grossed-up amount is recorded on your income statement as a reportable fringe benefit. That amount is not taxed again, but it is added to your income when your compulsory HELP or student loan repayment is worked out, which can push you into a higher repayment rate. An FBT-exempt electric car is still reportable. If you have a student loan, ask your packager for the reportable amount before you sign.
- Is a novated lease cheaper than a car loan?
- It depends on your salary, the price of the car, the term, and whether the car is electric — so compare the two figures on this page rather than assuming. A novated lease wins more often on a higher salary, because the pre-tax deduction is worth more, and on an eligible electric car, where there is no FBT to offset the saving. A car loan can win on a cheap car, on a low salary, or if you are likely to change jobs mid-term, since the lease travels with you but has to be re-novated with a new employer.
Where this comes from
Source
Australian Taxation Office — Fringe Benefits Tax Assessment Act 1986 s 9 (statutory formula); ATO TD 93/142 (minimum residual values); ATO luxury car tax thresholds
https://www.ato.gov.au/tax-rates-and-codes/fringe-benefits-tax-rates-and-thresholds
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