Novated Lease Calculator Australia

What Is a Novated Lease?

A novated lease is a three-party agreement between you (the employee), your employer, and a finance company. The finance company buys the car you choose, your employer leases it and pays the running costs, and you pay for all of it out of your salary package. If you leave your employer, the lease novates to the new one — the car and the obligation travel with you.

Because your employer is the one paying the bills, it can claim GST credits on the vehicle and the running costs, and it can structure the payments as salary sacrifice. Those two mechanics are where most of the savings come from — and they are exactly what a basic car-loan calculator ignores.

How Does a Novated Lease Work?

Each pay cycle, your employer deducts a packaged amount that covers the lease repayment plus budgeted running costs. Part of the deduction comes out of your salary before income tax is calculated (pre-tax), and part may come out after tax (post-tax) — usually the employee contribution used to cancel out fringe benefits tax. The employer forwards the money to the lease provider, who pays the finance and often administers the rego, insurance, servicing and fuel card as well.

The flow looks like this:

Gross salary
  → salary sacrifice (pre-tax + post-tax deductions)
  → taxable income
  → income tax + Medicare levy (+ HELP repayment)
  → take-home pay
  → vehicle deductions
  = net effect on your pocket

At the end of the term there is a residual value (balloon) to settle before you own the car. The calculator above shows it separately so nothing is buried inside the monthly figure.

How Our Novated Lease Calculator Works

The calculator chains four independent engines, and every number it shows traces back to one of them:

• Vehicle cost engine — takes the GST-inclusive drive-away price, removes the GST credits your employer can claim (capped at one-eleventh of the car limit), and adds the establishment fee to produce the financed amount.
• Lease finance engine — amortises the financed amount at your interest rate over the term against the balloon, giving the periodic repayment, total finance cost and the residual due at the end.
• FBT engine — applies the ATO statutory formula (20% of base value, grossed up at 1.8868 and taxed at 47%), including the electric car exemption and the post-1 April 2025 treatment of plug-in hybrids.
• Salary & tax engine — feeds the pre-tax deduction through the same income tax, Medicare levy and HELP/HECS rates used across AussieSalary, and measures the change in take-home pay.

The results panel shows the vehicle cost over the term, the annual package split into pre-tax and post-tax portions, the tax and HECS effect, and an explicit comparison against buying the same car with after-tax money. It is not a quote — providers vary on fees, rates and packaging policy — but every assumption is visible.

Novated Lease Salary Sacrifice

The packaged amount is usually split two ways. The pre-tax portion reduces your taxable income, so you save income tax and Medicare levy at your marginal rate. The post-tax portion (the employee contribution method, ECM) does not reduce taxable income — its job is to reduce the FBT taxable value to nil, which is why virtually all petrol, diesel and hybrid novated leases include one.

For a car fringe benefit the statutory formula taxable value is 20% of the vehicle’s base value each year. A post-tax contribution equal to that amount reduces the taxable value to zero, so no FBT is payable. For an FBT-exempt EV there is nothing to nil, so the whole package can be pre-tax — one of the reasons EV novated leases dominate savings comparisons.

Packaging structures differ between providers. Some package the entire cost pre-tax and leave FBT with the employer, recovering it through bigger deductions; others split the package pre-tax/post-tax to nil out FBT. The calculator lets you toggle both structures — the total deducted from your pay equals the package cost either way, but the tax outcome differs.

How Much Can a Novated Lease Save?

Three forces work in your favour: GST credits (up to 91,661 ÷ 11 on the vehicle purchase, plus GST on running costs), pre-tax treatment of running costs, and — if the vehicle is FBT-exempt — the absence of FBT and of any post-tax employee contribution. Working against you: finance costs, fees and the fact that the balloon is settled with post-tax money.

Here is the calculator’s own worked example — a $95,000 salary, $45,000 petrol car (drive-away, incl GST), five-year lease at 7.9% with the ATO-minimum 28.13% residual and default running costs, packaged with an ECM to cancel FBT:

Switch the same salary to a $52,000 battery electric vehicle and the FBT line disappears entirely: the full package is pre-tax, and the estimated saving against after-tax ownership rises to about $4,768.71 per year — roughly $23,843.55 across the lease.

Novated Lease vs Buying a Car

The honest comparison is not “lease vs buy” — it is how you fund the same car and the same running costs. Scenario A in the calculator buys the vehicle with a loan at the same interest rate and pays GST-inclusive running costs from take-home pay. Scenario B is the novated lease net of every tax and GST benefit, including the residual.

The novated lease wins most often on GST and pre-tax running costs; it loses when the finance rate quoted is worse than your loan alternatives, when fees are heavy, or when your marginal tax rate is low enough that salary sacrifice saves little tax. Neither scenario is automatically better — which is why the calculator shows both totals rather than a marketing headline.

EV Novated Lease Calculator

Electric vehicles get special treatment, and it matters enormously. A battery electric vehicle (or hydrogen fuel cell car) first held and used from 1 July 2022 is exempt from FBT if its value is under the luxury car tax threshold for fuel-efficient vehicles — 91,661 for 2026–27. Under that threshold, the whole package is deductible pre-tax and no employee contribution is needed. Above it, ordinary car FBT applies — the calculator warns you instead of pretending otherwise.

Plug-in hybrids are different. From 1 April 2025, PHEVs are no longer treated as zero or low emissions vehicles for FBT purposes and are not eligible for the exemption on new commitments. Arrangements committed before that date keep transitional exemption until 1 April 2027, as long as the commitment is not changed. Ordinary (non plug-in) hybrids never qualified for the exemption and are calculated like petrol and diesel cars.

The calculator models each case explicitly rather than assuming “EV means FBT-free” — select your vehicle type and the FBT engine applies the rules that actually apply to you.

Novated Lease Balloon Payment

The residual (balloon) is the lump sum that keeps your periodic repayments low. The ATO publishes guideline minimums so a lease does not quietly become a hire purchase: about 65.63% of the vehicle cost after one year, 46.88% after three, and 28.13% after five. Lower residuals mean larger repayments; higher residuals mean a bigger end-of-lease obligation.

Three things to remember: the balloon is paid with post-tax money (it is not packaged), GST is added to it, and if you refinance it into another lease you keep paying finance costs on a depreciating asset. The calculator defaults the residual to the ATO guideline minimum for your term and lets you override it.

Used Car Novated Lease

Used vehicles can generally be novated if the car will not be too old at lease end (many providers cap it around 12–15 years). The FBT and GST mechanics are the same, but base value rules can differ: if the employer holds the vehicle for more than four FBT years, the statutory formula base value declines 25% per year, which reduces FBT. This calculator uses your purchase price and flags that limitation rather than producing a false number. Very cheap used cars can also produce a package too small to fund the full ECM — the calculator warns you when a residual FBT amount would remain.

Novated Lease Tax

The tax chain has four links. Salary sacrifice reduces taxable income by the pre-tax deduction. FBT is the employer’s tax on the car benefit — statutory formula taxable value, grossed up, taxed at 47% — usually reduced to nil by your post-tax contribution. GST is claimed by the employer on the vehicle (within the car-limit cap) and on running costs. And reportable fringe benefits: if any taxable value survives, the grossed-up amount appears on your income statement and counts toward HELP repayment income, plus income tests like family benefits. Fully nilling FBT via ECM avoids the reportable amount.

One thing a novated lease does not change: employer superannuation guarantee is calculated on your ordinary time earnings before the lease deductions. If you also sacrifice into super, see our salary sacrifice guide and the superannuation calculator.

Novated Lease Savings Examples

All three examples below are calculated live by the engine on this page — same 7.9% rate, ATO minimum residuals, default running costs for the vehicle type, ECM packaging:

Read the pattern: the higher your marginal rate and the lower the vehicle’s FBT exposure, the larger the saving. The $130,000 EV scenario wins on both axes — top marginal-rate deductions and zero FBT — while the modest salary with a small petrol car saves least. Run your own numbers above rather than generalising from anyone else’s.