Novated Lease Calculator Australia

What the novated lease calculator does

The novated lease calculator estimates the net annual cost of running a car through salary packaging. It brings together the two forces that decide whether a novated lease is worthwhile: the income tax you save by paying from pre-tax salary, and any Fringe Benefits Tax (FBT) the arrangement attracts. The result is the real yearly cost after those effects, which is what you should compare against simply buying or financing a car yourself.

Novated leasing is popular but frequently misunderstood. The tax saving is genuine, yet FBT can claw much of it back for a conventional car. This tool shows both sides so the headline "save tax" pitch turns into a number you can actually judge.

How a novated lease works

A novated lease is a three-way agreement between you, your employer and a financier. The lease is "novated" to your employer, who takes the payments out of your salary before income tax is calculated. Because the payments come from pre-tax income, your taxable income falls and so does your tax bill.

The catch is that providing a car this way is a benefit, and benefits can trigger FBT. The most common method for valuing the car benefit is the statutory method, which applies a set fraction to the car's value. FBT reduces the net advantage, and for many petrol or diesel cars it offsets a large part of the income-tax saving.

How the net cost is calculated

The calculator combines the tax saving and FBT. The net cost is the annual cost of the lease minus the income tax saved (the annual cost multiplied by your marginal rate), plus any FBT payable. FBT is worked out as the car price multiplied by the statutory fraction, multiplied by the gross-up rate, multiplied by the FBT rate, which is zero for eligible electric vehicles.

The tax-saving term is the income tax you avoid by paying pre-tax. The FBT term is the cost of the benefit. For an eligible electric vehicle, the FBT term can be zero, which is what makes EV packaging so attractive.

The electric vehicle exemption

A significant change in recent years is that eligible electric vehicles can be exempt from FBT. When FBT falls away, the arrangement keeps the full income-tax saving without the offsetting cost that a conventional car carries. This is why an EV often packages far better than a comparable petrol car under a novated lease.

Eligibility is not automatic. Conditions apply to the type of vehicle and how it is provided. Before assuming a car qualifies, confirm it meets the current requirements, because the exemption is the single biggest driver of the result for many people.

When to use it

The calculator suits several decisions:

• Comparing a novated lease against buying a car outright or with a normal car loan
• Estimating the yearly cost of packaging a specific vehicle
• Seeing how much the EV FBT exemption changes the outcome
• Testing the effect of your marginal tax rate on the saving
• Weighing a more expensive EV against a cheaper petrol car once tax is included

What affects the outcome

Several inputs move the result noticeably:

• Your marginal rate. The higher your tax bracket, the more the pre-tax payments save you. High earners generally benefit most.
• Whether FBT applies. An eligible EV with no FBT and a petrol car with full FBT can produce very different net costs from the same list price.
• The car's value. FBT under the statutory method scales with the car's price, so a more expensive conventional car carries more FBT.
• The lease and running costs. Novated leases often bundle running costs such as insurance, registration and servicing. A fuller package changes the annual cost figure.

Comparing a lease with buying outright

The fairest way to judge a novated lease is against the alternatives you would otherwise use: buying the car with cash, or financing it with an ordinary car loan. A novated lease can win because the payments come from pre-tax income and, for an eligible EV, because FBT falls away. But those advantages are not free of conditions.

When you compare, look at the whole picture rather than the monthly payment alone. A lease bundles running costs and spreads them, which can make budgeting easier, but it also locks you into an agreement with a residual to settle at the end. Buying outright avoids finance costs entirely but ties up your cash and gives no tax benefit. An ordinary loan sits in between. The calculator isolates the tax and FBT effects so you can add them to a like-for-like comparison of the other options, rather than being swayed by a headline saving that ignores the residual and the commitment.

Things to keep in mind

A novated lease is a commitment, not just a tax play. Keep these points in view:

• There is usually a residual. At the end of the lease a balloon or residual amount is typically owed. The calculator focuses on the annual running cost, so budget separately for the residual.
• Leaving your employer matters. The arrangement is tied to your employment. If you change jobs, the lease may need to move with you or be settled, which can complicate things.
• The saving depends on your income. If your marginal rate is low, the pre-tax benefit is smaller and the case for leasing weakens.
• Bundled costs vary. Comparing packages is only fair when they include the same running costs. Read what each quote actually covers.
• Estimates are not quotes. Real packages include fees and finance terms that differ between providers.

The rates and thresholds this tool uses are kept up to date, so your result reflects current settings. Treat it as a way to compare scenarios, and confirm the detail, including EV eligibility, with the tax authority or a licensed adviser before signing.

This article is general information only and not financial advice.

About This Novated Lease Calculator

Use this novated lease calculator to get an instant, accurate estimate. The figures follow official ATO guidance and every rate and threshold is kept up to date for 2026. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.