Novated Lease Calculator – Tax Savings, FBT and Take-Home Pay Impact
Most novated lease quotes show you a shiny per-pay deduction and skip the machinery. This one runs the machinery in the open: your finance and running costs packaged from pre-tax salary at GST-exclusive prices, the 20% statutory FBT method, the employee contribution method (ECM) that zeroes the FBT, the ATO minimum residual for your term — and then a side-by-side against buying the same car yourself, so the benefit you see is a real take-home difference, not a brochure number.
Your salary, car and lease
Advanced options — FBT handling and yearly running costs
The advanced fields below are already included in the result with their default values — open Advanced options to change them.
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Your take-home comparison
A$114.34 per fortnight · A$14,863.72 over the 5-year lease — versus buying the same car yourself
The two scenarios, side by side
What is inside the package
The lease wins on these numbers
Packaging the car leaves you A$2,972.74 a year better off than buying the same car yourself. About A$2,268.20 of that is income tax and Medicare you no longer pay, and about A$704.55 is GST your employer claims back on the running costs. Over the full 5-year lease the difference adds up to A$14,863.72 — and the residual is not a hidden catch in that figure, because the buying scenario carries the same balloon on its loan.
An estimate, not a quote: financiers set their own rates and residuals, employers vary in what they pass on, and reportable fringe benefits can affect HECS-HELP, child support and tax offsets in ways this page does not model. Every assumption used here is printed in full further down the page.
- Two FBT methods, one choice at the top: the 20% statutory formula, or ECM — contribute 20% of the base value after tax and the FBT vanishes.
- The saving stacks two effects: pre-tax dollars (about 32 cents kept per packaged dollar at a 30% bracket plus Medicare) and GST your employer claims, so the package carries GST-exclusive prices.
- The benefit steps, not slides, with salary — it rises only when your marginal tax rate rises — and a shorter lease shows a bigger yearly benefit against a bigger residual.
- ECM vs the statutory formula — the FBT decision inside every lease
- How a novated lease works, in three steps
- The maths, and every assumption in the open
- Going deeper
- Same package, four salaries: why the benefit steps instead of sliding
- Short lease, big yearly benefit — and a big residual
- ECM against statutory, dollar for dollar
- The running-cost budget is where packages leak
- Frequently asked questions
ECM vs the statutory formula — the FBT decision inside every lease
A company car is a fringe benefit, and the tax office charges FBT on its value. There are two standard ways to work that value out, and which one your package uses changes your numbers more than almost anything else on this page. Your choice is at the top of the calculator — here is what it actually does.
| Lease term | ATO minimum residual | On a A$50,000 car |
|---|---|---|
| 1 year | 65.63% | A$32,815 |
| 2 years | 56.25% | A$28,125 |
| 3 years | 46.88% | A$23,440 |
| 4 years | 37.50% | A$18,750 |
| 5 years | 28.13% | A$14,065 |
ECM — contribute, and the FBT vanishes
The statutory taxable value of the car benefit is 20% of its base value. With the employee contribution method you pay that same 20% — A$10,000 a year on a A$50,000 car — from your after-tax pay, as part of your normal package deductions. The taxable value drops to zero and no FBT is payable at all.
Statutory formula — no contribution, FBT billed
Nobody contributes, so the taxable value stands at 20% of the base value: A$10,000 on a A$50,000 car. Grossed up by 2.0802 that becomes A$20,802, and FBT at 47% comes to A$9,776.94 a year, billed to your employer. Many employers pass that cost straight back into the package.
Why ECM usually wins
Giving up the pre-tax deduction on A$10,000 costs you roughly your marginal rate on it — about A$3,200 at a 32% marginal rate. Refusing the ECM leaves a A$9,776.94 FBT bill in the system instead. That gap is why the ECM is the default in almost every package sold today.
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How a novated lease works, in three steps
Your employer leases the car
A finance company buys the car and leases it; your employer takes over the lease under a novation agreement and you drive the car. The amount financed is the drive-away price, and the lease is struck with a residual from the ATO minimum table.
The costs come out of your pay — mostly before tax
Each pay, payroll deducts the finance rental and a budget for fuel, insurance, rego, servicing and tyres. Most of it comes out of pre-tax salary, and because your employer claims the GST, the packaged amounts are the GST-exclusive ones. Under the ECM, a slice equal to 20% of the car’s base value is taken after tax instead, which zeroes the FBT.
At the end, the residual is due
When the term ends you can pay the residual and keep the car, trade it in, or hand it back. The residual is set by the ATO table — 28.13% of the price after five years — and it is a real lump sum to plan for, which is why this calculator shows it on its own line instead of burying it.
The maths, and every assumption in the open
The default example, worked end to end
Salary A$120,000, car A$50,000, five years at 8.5%. The residual is 28.13% of A$50,000 = A$14,065, and the rental on the drive-away price works out to A$836.89 a month — A$10,042.66 a year. Running costs of A$7,750 including GST are packaged at A$7,045.45 once the GST comes out, so the total package is A$17,088.12 a year. Under the ECM, A$10,000 of that is taken after tax and A$7,088.12 before tax, leaving a taxable salary of A$112,911.88 and a tax bill of A$26,651.80 instead of A$28,920. Buying the car yourself leaves A$73,287.34 in your pocket after car costs; the lease leaves A$76,260.08. Difference: A$2,972.74 a year.
Every assumption, printed
- Finance: the amount financed is the drive-away price including GST, and the rental is struck on that amount with the ATO minimum residual for the term. Because the employer claims the GST credit on the car upfront, the rental is packaged with no GST added on top (a chattel-style structure). Running costs are packaged GST-exclusive because the employer claims the GST on each bill.
- Buying scenario: the same car financed on the same term and rate and paid from after-tax pay, with the same running costs at GST-inclusive prices. No deposit in either scenario.
- End of lease: the residual is payable if you keep the car — in both scenarios, because the buying loan carries the same balloon. It is therefore left out of the yearly comparison and shown on its own line.
- The ECM split: the post-tax ECM contribution forms part of your total package deductions — pre-tax plus post-tax always adds up to the finance, running and admin total. It is not charged on top of the package.
- Tax: 2026–27 Australian resident rates plus the 2% Medicare levy, applied to taxable salary. No tax offsets, HECS-HELP debts, superannuation changes or pay rises are modelled, and the Medicare low-income reduction is not applied.
- FBT: the base value is the drive-away price and the car is available for the full year (365 days), so the statutory fraction is a flat 20%. Reportable fringe benefits can affect HECS-HELP repayments, child support and some offsets — not modelled here.
When a novated lease does not pay
The saving is your marginal tax rate working on the packaged amount, so it shrinks fast as income falls — and it rests on the packaging running smoothly for the whole term. Change jobs and the novation has to move with you, be paid out, or be carried privately, and an early payout brings the remaining rentals and the residual due at once. If the package ever costs more than the salary can carry, or your marginal rate is low, run the numbers here first: this calculator will show a negative benefit rather than hide it.
Going deeper
Two separate effects stack up. The first is tax: every dollar of car cost that comes out of pre-tax salary is a dollar you never pay income tax or Medicare levy on, so at a 30% bracket plus Medicare you keep about 32 cents of each packaged dollar. The second is GST: your employer, being registered, claims the GST on the car and on every running-cost bill, so the package only has to carry the GST-exclusive prices — on A$7,750 of running costs that alone is worth about A$705 a year. Neither effect needs the car to be cheap or the lease to be clever; they need your marginal rate to be high enough, and the packaged budget to be money you would genuinely have spent on the car anyway. Package a budget far above your real running costs and you are not saving tax — you are just pre-paying expenses at a discount and locking the cash up until the lease reconciles.
Eligible zero and low emission cars — mainly battery electric and hydrogen fuel cell cars first held and used on or after 1 July 2022, priced under the luxury car tax threshold for fuel-efficient vehicles — are exempt from FBT entirely. That exemption is worth far more than the ECM shuffle: there is no taxable value to zero out, so the whole package can run pre-tax, and on the right car at the right salary the saving can be several times the figure this page produces. Plug-in hybrids lost the exemption for new leases from 1 April 2025. Because the EV rules change both the FBT treatment and the comparison, this calculator models only the standard petrol and diesel methods — if your car is an eligible EV, treat a provider’s written quote as the better guide and expect it to beat these numbers.
Same package, four salaries: why the benefit steps instead of sliding
Most people expect a bigger salary to mean a smoothly bigger novated lease saving. On this page’s own model it does not work that way: the saving steps up only when your marginal tax rate steps up, and stays flat everywhere in between. The table below holds the car, the term, the rate and the running costs at the defaults — a A$50,000 car over five years at 8.5%, with A$7,750 of GST-inclusive running costs — and changes only the salary. Every figure was produced by the calculator itself.
| Salary | Benefit per year | Benefit per fortnight | Over the 5-year lease |
|---|---|---|---|
| A$40,000 | A$1,909.53 | A$73.44 | A$9,547.63 |
| A$90,000 | A$2,972.74 | A$114.34 | A$14,863.72 |
| A$120,000 | A$2,972.74 | A$114.34 | A$14,863.72 |
| A$160,000 | A$3,468.91 | A$133.42 | A$17,344.56 |
The reason is in the calculator’s tax model. It applies the page’s own bracket rates plus a 2% Medicare levy: 15% plus Medicare, or 17 cents in the dollar, on income between A$18,200 and A$45,000; 30% plus Medicare, or 32 cents, between A$45,000 and A$135,000; and 37% plus Medicare, or 39 cents, between A$135,000 and A$190,000. The pre-tax packaged amount on the defaults is A$7,088.12 a year, so the tax saved is that amount times your marginal rate: A$1,204.98 at 17%, A$2,268.20 at 32%, and A$2,764.36 at 39%. Add the GST saving, which is the same A$704.55 at every salary, and you get the table above, to within a cent of rounding. That is also why A$90,000 and A$120,000 give identical benefits to the cent: both salaries sit in the same 30% bracket, so every packaged dollar saves the same 32 cents.
The practical point is about pay rises. A raise that keeps you inside your current bracket does not change your lease benefit at all — it only changes your take-home pay. A raise that crosses a bracket boundary, from A$135,000 to just above it for example, lifts the benefit by 7 cents on every pre-tax packaged dollar, which on this package is about A$496 a year. If a provider quotes you a saving that grows smoothly with salary, they are not using this page’s bracket maths — ask which model they used before comparing quotes.
Short lease, big yearly benefit — and a big residual
Change only the term on the defaults and the yearly benefit moves a lot. A one-year lease shows a benefit of A$6,407.33 a year; a three-year lease shows A$3,616.24; the five-year default shows A$2,972.74. That pattern surprises people until they see what sits behind it: the same car cost packed into fewer years means more cost per year coming out of pre-tax pay, so more tax saved per year. The table below, again from the calculator itself, sets the yearly figure against the whole-lease figure and the residual you owe at the end.
| Lease term | Finance per year | Benefit per year | Benefit over the lease | Residual at the end |
|---|---|---|---|---|
| 1 year | A$20,775.74 | A$6,407.33 | A$6,407.33 | A$32,815 |
| 3 years | A$12,053.61 | A$3,616.24 | A$10,848.73 | A$23,440 |
| 5 years | A$10,042.66 | A$2,972.74 | A$14,863.72 | A$14,065 |
Read the table in both directions. Per year, short wins: the one-year benefit is more than double the five-year benefit. Over the whole lease, long wins: five years of A$2,972.74 adds up to A$14,863.72, well ahead of the one-year A$6,407.33. And the residual runs the other way entirely: after one year you still owe A$32,815, or 65.63% of the car’s price, while after five years the residual is A$14,065, or 28.13%. A short lease therefore concentrates both the saving and the end-of-lease problem. If you plan to keep the car, the five-year shape is usually easier to live with: a smaller yearly benefit, a longer run of it, and a residual less than half the one-year figure. If you plan to hand the car back or trade it, the residual matters less — but the yearly benefit comparison still favours the shorter term only if you actually re-lease or re-buy afterwards, since the benefit stops when the lease stops.
ECM against statutory, dollar for dollar
The method choice at the top of the calculator is worth more than any other single input. On the defaults, the employee contribution method gives a benefit of A$2,972.74 a year, while the statutory formula gives A$6,172.74 a year — a gap of A$3,200.00. Both figures come from the calculator, and the difference is entirely in how much of the package comes out of pre-tax pay. Under the ECM, A$10,000 of the package — 20% of the car’s A$50,000 base value — is taken after tax, leaving A$7,088.12 pre-tax and a tax saving of A$2,268.20. Under the statutory formula, nothing is taken after tax, so the whole A$17,088.12 package comes out pre-tax and the tax saving is A$5,468.20. Add the same A$704.55 of GST saving to each and you get the two headlines, to within a cent of rounding.
So why does this page, and nearly every package sold today, default to the ECM if the statutory headline is A$3,200 higher? Because the statutory headline leaves a bill sitting with your employer: the car’s taxable value of A$10,000, grossed up by 2.0802 to A$20,802, attracts FBT at 47%, which is A$9,776.94 a year. Under the ECM that bill is zero, because your A$10,000 after-tax contribution wipes the taxable value out. Many employers pass the FBT cost straight back into the package, and if yours does, the statutory headline overstates your gain by up to that A$9,776.94 — enough to turn the apparent A$3,200 advantage into a loss. The honest comparison is therefore not headline against headline. It is ECM at A$2,972.74 with no FBT bill anywhere, against statutory at A$6,172.74 only if your employer absorbs the FBT, and against a much smaller or negative figure if the FBT comes back to you. Before choosing the statutory formula, ask your employer one question in writing: who pays the FBT?
The running-cost budget is where packages leak
The finance rental gets all the attention, but the running-cost budget is where a package quietly grows or shrinks. On the defaults the running costs are A$7,750 a year including GST — fuel A$2,600, insurance A$1,800, registration A$950, servicing A$1,400 and tyres A$1,000. Because your employer claims the GST, the package only carries the GST-exclusive figure: A$7,750 divided by 1.1 is A$7,045.45, and the A$704.55 difference is the GST saving inside the headline benefit. Every extra GST-inclusive dollar you package therefore saves twice: once as GST your employer claims, and once as tax on the pre-tax dollar.
The calculator makes the double saving easy to check. Raise only the fuel budget from A$2,600 to A$3,600 — A$1,000 more of running costs — and the benefit rises from A$2,972.74 to A$3,354.56 a year, a gain of A$381.82. The arithmetic is A$909.09 of extra GST-exclusive package (A$1,000 divided by 1.1), saving 32% tax, or A$290.91, plus A$90.91 of GST — A$381.82 in total. That is a genuine saving, but only if the fuel money would have been spent anyway. The notes on this page warn about the mirror image: package a budget far above your real running costs and you are not saving tax, you are pre-paying expenses at a discount and locking the cash up until the lease reconciles. The discipline is simple. Budget what you actually spend, keep the admin fee in view (it is A$0 on the defaults, but providers do charge it), and remember that the residual is shown separately and left out of the yearly comparison in both scenarios — it is payable if you keep the car either way, so it cancels out of the comparison instead of hiding inside it.
Novated lease versus car loan: the honest comparison
Compare a novated package against buying the same car with a personal loan or cash, paying running costs from after-tax dollars, over the same term and the same kilometres. The novated side must include the lease payments, the bundled running costs, the FBT effect or employee contribution, fees, and the residual value. The purchase side must include loan interest, running costs after tax, and the car resale value at the end. Whichever total is lower wins, and the comparison must use the same car, because a novated package that encourages a more expensive car than you would otherwise buy has already lost the comparison before tax is counted.
A provider quote that compares a novated lease with a car loan on different cars, different terms, or different kilometre assumptions is not a comparison. Rebuild it on equal terms before deciding.
Kilometres: why they decide the result
High-kilometre drivers gain most from novated leases, because more running costs flow through the pre-tax package and the FBT statutory formula, which does not depend on kilometres, becomes relatively more favourable. Low-kilometre drivers gain least, because the fixed costs of the package, fees and the residual risk, are spread over fewer pre-tax dollars.
If your kilometres fall, because of a move, remote work, or a second car, tell the provider and re-budget the running costs. A package budgeted for 25,000 kilometres a year that actually runs 10,000 will over-sacrifice salary all year and reconcile painfully at year end.
End of lease: residual, payout, and next car
At term end, three paths exist: pay the residual and keep the car, refinance the residual into a new lease or loan, or sell the car and settle the residual from the proceeds, paying any shortfall or keeping any surplus depending on the agreement. The shortfall case is the risk: if the car market value has fallen below the residual, the employee covers the gap, and that gap can erase years of tax saving in one payment.
Plan the end at the start. Choose a residual and a term that match how long you will actually keep the car, and check the market value against the residual well before term end, so a shortfall is a planned decision, not a surprise.
Frequently asked questions
What is a novated lease?
A novated lease is a three-way arrangement. A finance company leases the car, your employer takes over the lease payments under a novation agreement, and the lease rental plus a budget for running costs is deducted from your salary — mostly before tax. You drive the car as your own, and when the term ends you choose to pay the residual and keep it, trade it in, or hand it back.
How much can I save with a novated lease?
It depends mostly on your marginal tax rate and how much you package. On this page’s example — a A$120,000 salary and a A$50,000 car over five years with the ECM — the saving is A$2,972.74 a year: A$2,268.20 of income tax and Medicare no longer paid, and about A$705 of GST your employer claims back on the running costs. Higher incomes and larger genuine running-cost budgets save more; on a low income the saving can shrink to nothing, which this calculator will show honestly as a negative result.
What is the employee contribution method (ECM)?
Under the statutory formula, the car’s taxable value is 20% of its base value, and FBT at 47% is charged on the grossed-up amount — A$9,776.94 a year on a A$50,000 car, a cost employers usually pass back into the package. With the ECM you contribute that same 20% — A$10,000 a year — from your after-tax pay towards the car’s costs. The taxable value falls to zero and no FBT is payable. The contribution is part of your normal package deductions, split into pre-tax and post-tax parts; it is not an extra charge on top of them.
What residual is left at the end of a novated lease?
The ATO sets minimum residual values by lease term: 65.63% of the car’s cost after one year, 56.25% after two years, 46.88% after three, 37.50% after four and 28.13% after five. On a A$50,000 car over five years that leaves a residual of A$14,065, payable as a lump sum if you keep the car. A financier cannot set the residual below the ATO minimum for the term.
Are electric cars treated differently on a novated lease?
Yes. Eligible zero and low emission cars — mainly battery electric and hydrogen fuel cell cars first held and used on or after 1 July 2022 and priced under the luxury car tax threshold for fuel-efficient vehicles — are exempt from FBT altogether, which usually makes a novated lease on them far more valuable than the petrol figures here. Plug-in hybrids lost the exemption for leases starting on or after 1 April 2025. This calculator models the standard petrol and diesel methods, so treat a provider’s quote as the better guide for an eligible EV.
What happens if I change jobs during the lease?
The lease does not disappear when you leave. If your new employer offers salary packaging, the novation can usually transfer to them. Otherwise you keep paying the financier yourself until it can be re-novated, or you pay the lease out early — which can be expensive, because the remaining rentals and the residual come due together. That is the main risk to weigh before signing: the tax saving in this calculator assumes the packaging runs for the full term.
Why is my saving the same at A$90,000 and A$120,000?
Because both salaries sit in the same tax bracket in this calculator’s model. Between A$45,000 and A$135,000 the marginal rate is 30% plus the 2% Medicare levy, or 32 cents on every pre-tax packaged dollar, so the tax saved on the same A$7,088.12 of pre-tax packaging is A$2,268.20 at either salary, and the total benefit is A$2,972.74 a year at both. The benefit only steps up when your salary crosses a bracket boundary — at A$40,000, in the 15% bracket, the same package saves A$1,909.53 a year, and at A$160,000, in the 37% bracket, it saves A$3,468.91. A pay rise inside your bracket changes your take-home pay, not your lease benefit.
Does a bigger car always mean a bigger saving?
Barely, on this page’s defaults. Raising the car price from A$50,000 to A$60,000 lifts the yearly benefit only from A$2,972.74 to A$2,975.47 — a gain of A$2.73. The reason is the ECM itself: a dearer car raises the finance rental, but it also raises the 20% after-tax ECM contribution, from A$10,000 to A$12,000 a year, which eats almost all of the extra pre-tax room the bigger rental creates. What a bigger car mostly buys you is a bigger residual at the end, not a bigger yearly saving. If a provider sells you a dearer car on the promise of a much larger tax saving, run the exact price through this calculator first.
What happens to the residual if I hand the car back at the end?
At the end of the lease you have three choices: pay the residual and keep the car, trade it in, or hand it back. The residual is a real lump sum set by the ATO minimum table — A$14,065 after five years on a A$50,000 car — and this calculator shows it on its own line precisely because it is not part of the yearly benefit comparison. The yearly comparison leaves it out in both scenarios, because a loan used to buy the car yourself would carry the same balloon. If you hand the car back, check your lease for return conditions and any end-of-lease charges before signing: this calculator models the residual amount, not the condition or fee terms of a return.
Is the benefit per year, or over the whole lease?
Both figures are shown, and they answer different questions. On the defaults the benefit is A$2,972.74 per year, which is A$114.34 per fortnight, and A$14,863.72 over the full five-year lease. Use the yearly figure to compare against your annual budget, and the lease-total figure to judge whether the arrangement is worth the commitment — remembering that the benefit stops when the lease stops, and that the residual is separate from both figures. If you re-lease at the end, the yearly benefit starts again on the new car; if you do not, the five-year total is the whole story.
How do I compare a novated lease with a car loan fairly?
On the same car, term, and kilometres, including lease payments, running costs, FBT or employee contribution, fees, and residual on the novated side, and loan interest, after-tax running costs, and resale value on the purchase side.
Do high kilometres help a novated lease?
Yes. More running costs flow pre-tax, and the statutory formula FBT value does not depend on kilometres, so high-kilometre drivers gain most and low-kilometre drivers least.
What happens at the end of a novated lease?
You pay the residual and keep the car, refinance it, or sell the car and settle the residual, covering any shortfall if the market value is below the residual.
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This calculator is an estimate built on the assumptions printed on this page: 2026–27 Australian resident tax rates plus the 2% Medicare levy, ATO minimum residual values, a 20% statutory FBT fraction, the type 1 gross-up rate of 2.0802 and the ECM split described above. It is not financial advice, and it is not affiliated with the ATO or any salary packaging provider. Real quotes differ — financiers set their own interest rates and may set residuals above the ATO minimum, providers charge admin fees, and employers vary in what they pass on. Reportable fringe benefits arising from a novated lease can affect HECS-HELP repayments, child support assessments, Medicare levy surcharge and some tax offsets, none of which are modelled here. Get a written quote from your employer’s packaging provider, and independent financial advice, before signing a lease.
Packaged the Aussie way — before tax, with the GST claimed back.
↑ 📖Novated Leases Explained
Salary sacrifice, FBT methods, and the running-cost budget.