Novated Lease Calculator Australia
Compare an annual car budget paid from take-home pay with a simplified novated-lease payroll split. Choose a conventional vehicle using the employee contribution method or an electric car you have independently confirmed is FBT-exempt, then review tax effect, residual and term cash commitments.
Enter the quote assumptions
Employee and vehicle
Annual quote budget
FBT year and lease end
Calculate to review the statutory-value assumption, unmodelled FBT and excluded quote items.
A novated lease changes who pays and how payroll funds it
A novated lease is generally a three-way arrangement between employee, employer and finance provider. While employment and the novation continue, the employer takes on lease-payment obligations and makes the car available as an employment benefit. Payroll deductions fund the agreed finance, running costs, administration and tax treatment.
This page begins with an annual budget from a real quote. It does not calculate finance interest from a vehicle price because provider rates, financed fees, GST treatment, payment timing and residual differ. Add annual lease payments, running-cost budget and administration fees on the same basis used by the quote.
- Total the annual budget
Finance, operating allowances and fees become one car-cost amount. - Choose the FBT scenario
Conventional ECM or a confirmed eligible exempt electric car. - Split payroll deductions
Estimate pre-tax and post-tax parts, then recalculate income tax. - Keep the residual visible
Show the lease-end amount separately from annual deductions.
Packaging: after-car cash = salary − pre-tax budget − tax on reduced salary − post-tax contribution.
Illustrative benefit: packaged after-car cash − outside after-car cash.
The comparison holds the annual nominal car budget constant. Actual package budgets may be lower because of employer GST credits or higher because of fees, insurance, finance rate and FBT funding. Replace the inputs with complete, comparable quote figures before judging a result.
Conventional cars commonly use an employee contribution method
Under the statutory formula method, a full-year conventional car fringe benefit begins with 20% of the FBT base value, adjusted for days available in the FBT year. Employee after-tax contributions can reduce the taxable value. Many novated arrangements set post-tax contributions equal to the statutory taxable value, reducing it to nil, with remaining budget deductions made pre-tax.
Simplified ECM split: post-tax contribution = the lesser of annual budget and statutory value; pre-tax budget = annual budget − post-tax contribution.
With the default $55,000 base and a full 365-day year, statutory value is $11,000. The $18,300 annual budget is split into an $11,000 post-tax contribution and $7,300 pre-tax deduction. Tax is recalculated on salary reduced by $7,300. The page does not calculate employer FBT because the simplified ECM assumes the taxable value is fully reduced.
The statutory formula’s base value has detailed rules and can differ from drive-away price. Registration, stamp duty, fleet discount, accessories, prior ownership and the one-third reduction after four full FBT years can matter. Use the provider’s documented FBT base rather than assuming the dealer invoice total.
The electric-car exemption needs all eligibility conditions
The page’s EV option moves the entered annual budget to pre-tax and sets conventional statutory FBT to zero. Select it only after confirming the car benefit qualifies. The ATO states that an eligible car must be a zero or low emissions vehicle, first held and used on or after 1 July 2022, provided to a current employee or associate, and never have had luxury car tax payable on its supply or importation.
Battery electric and hydrogen fuel-cell cars can qualify when all conditions are met. Plug-in hybrid treatment changed after 31 March 2025, subject to transitional binding-commitment rules. A conventional hybrid that cannot be recharged from an external electricity source is not an eligible zero or low emissions vehicle for this exemption.
Benefits under salary packaging can be included, but exempt electric-car benefits can still contribute to the employee’s reportable fringe benefits amount. Reportable amounts can affect HELP repayment income, Medicare levy surcharge, child support, family assistance and other tests even though the employee does not pay ordinary income tax on the benefit itself.
Running expenses follow the eligible car benefit
Associated registration, insurance, repairs, maintenance and fuel or electricity can also receive exempt treatment when the underlying car qualifies and the requirements are met. Home-charging reimbursement needs records and an accepted calculation method. The annual running-cost input is only the budget; it does not establish the tax treatment or substantiation.
Tax saving is not the same as vehicle saving
The result uses 2026–27 Australian resident tax bands, calculated LITO and a simplified individual Medicare levy. It compares tax before and after the pre-tax deduction. It does not model HELP, Medicare levy surcharge, private health adjustments, spouse or dependant thresholds, other income, deductions or tax offsets. Those interactions can materially change the result.
A packaging benefit shows that some of the same annual car budget is funded before income tax. It does not prove the novated lease is cheaper than buying another car, using cash, taking a secured loan or keeping the current vehicle. Finance rate, vehicle price, kilometres, maintenance, insurance, tax position and resale outcome determine the broader comparison.
| Cost | Novated quote question | Outside-package comparison |
|---|---|---|
| Vehicle acquisition | What base price, discount and financed amount are used? | Use the actual cash or loan purchase price. |
| Finance | What interest rate, fees and payment timing apply? | Compare with loan interest or cash opportunity cost. |
| Running costs | Are budgets reconciled to actual spend and refunded? | Use the same kilometres, insurance and maintenance. |
| Administration | List establishment, monthly and variation fees. | Include any account or loan fees. |
| End value | Who carries resale risk against the residual? | Estimate owned-car resale value and disposal costs. |
| Employment change | What happens on resignation, leave or redundancy? | Compare flexibility and early-repayment exposure. |
The residual remains a real lease-end decision
The residual is not included in annual payroll deductions on this page. It is shown separately as entered vehicle base multiplied by the residual percentage. At lease end, options and obligations depend on the agreement: refinance, pay the amount and acquire the vehicle through the applicable process, sell or trade the car and settle the lease, or enter another arrangement.
ATO residual guidance for a car with an eight-year effective life lists 65.63% after one year, 56.25% after two, 46.88% after three, 37.5% after four and 28.13% after five, absent evidence supporting a lower market value. The quote may use a particular financed cost and taxes, so enter its actual residual rather than relying only on the default percentage.
If market value is below the payout, the employee may need to fund a shortfall under the agreement. If it is above, the treatment of surplus depends on how disposal is structured. A tax benefit during the term does not eliminate this resale risk.
Employment continuity is part of the risk
Novation usually depends on the employer. Changing jobs, taking unpaid leave or being made redundant can transfer obligations back to the employee, require a new employer to accept novation or trigger early termination. Ask for the exact process and costs before signing, particularly when the lease term is long relative to expected job tenure.
Keep provider calculations, finance documents, salary packaging agreement, FBT basis, running-cost reconciliations and end-of-lease options. Recalculate when salary, tax settings, kilometres, insurance or employment changes. A quote’s first-year benefit may not repeat unchanged for five years.
Novated lease questions
Does a novated lease make the car tax deductible to me?
Generally the employer leases the vehicle and payroll funds the benefit. The employee usually cannot separately claim the packaged car’s running expenses as their own deduction. The result models payroll tax effect, not a personal car deduction.
Are all electric cars FBT-exempt?
No. Vehicle technology, first-held-and-used date, current-employee use and luxury car tax history are among the conditions. PHEVs have additional post-March-2025 restrictions. Confirm the specific car and arrangement.
Why is part of a conventional car budget post-tax?
The simplified ECM uses after-tax employee contributions to reduce statutory car-fringe-benefit taxable value. Only the remaining budget is shown pre-tax. A provider may calculate a different split from complete FBT facts.
Is the residual included in the annual benefit?
No. The annual comparison holds the annual budget constant and shows residual separately. Review how it will be funded and compare expected market value with the payout.
Does the result include HELP or child support effects?
No. Reportable fringe benefits and reduced taxable salary can interact with repayment income, child support and family payments. Obtain a complete personalised calculation when those tests matter.
References
- Australian Taxation Office. (2024). Electric vehicles and fringe benefits tax.
- Australian Taxation Office. (2024). Fringe benefits tax — a guide for employers.
- Australian Taxation Office. (2024). Taxation Determination TD 93/142 — residual values.
- Australian Taxation Office. (2024). Class Ruling CR 2024/59 — novated car lease administration example.
- Australian Government, Federal Register of Legislation. (2026). Taxation Administration (Withholding Schedules) Instrument 2026.