Novated Lease Calculator Australia

Use this Pro calculator to estimate whether salary-packaging a car through a novated lease is worthwhile. It models the statutory Fringe Benefits Tax method, shows the income-tax saving from packaging the lease pre-tax, and compares the net cost with buying the car using after-tax income.

How a novated lease saves tax

A novated lease lets you pay for a car and its running costs from your pre-tax salary. Because that money comes out before income tax, it lowers your taxable income, so you pay less tax, roughly the packaged amount multiplied by your marginal rate plus the Medicare levy.

The catch is Fringe Benefits Tax. Providing a car through salary packaging creates a fringe benefit, and FBT is charged at a high rate on the car's "statutory value" (a set percentage of its price). Left unmanaged, FBT can wipe out the income-tax saving.

The Employee Contribution Method (ECM)

Most novated leases use the Employee Contribution Method to deal with FBT: you pay part of the lease from after-tax salary, equal to the statutory value. That post-tax contribution reduces the FBT taxable value to zero, so no FBT is payable, while the rest of the lease is still packaged pre-tax. This calculator assumes ECM by default; you can turn it off to see the FBT that would apply without it.

Reading the result

The calculator reports the annual income-tax saving, any residual FBT, the net annual benefit (saving minus FBT), and the effective annual cost of the car compared with buying it outright from after-tax income. A positive net benefit means packaging is cheaper than buying with after-tax money.

A worked example

Consider Sarah, on A$120,000 a year, leasing a A$45,000 car with A$12,000 a year in lease and running costs packaged pre-tax. At her marginal rate of 37% plus the 2% Medicare levy, packaging A$12,000 of salary before tax saves roughly A$4,680 in income tax each year (A$12,000 × 39%).

Under the statutory method the car's FBT value is 20% of A$45,000 = A$9,000. Using ECM, Sarah contributes A$9,000 from after-tax pay, which drives the FBT liability to zero. The remaining A$3,000 of the package stays pre-tax. Because most of the running costs are bundled and GST is stripped from the lease payments as well, her net position is clearly better than buying the same car from take-home pay. The tool shows the net annual benefit and the effective yearly cost so she can see exactly how much packaging saves versus paying cash.

Electric vehicles and the FBT exemption

For eligible low- and zero-emission cars first held and used after 1 July 2022 and priced under the LCT fuel-efficient threshold, the fringe benefit can be fully FBT-exempt. That changes the maths dramatically: with no FBT to neutralise, there is no need for a post-tax ECM contribution, so effectively the whole lease, including running costs, comes out of pre-tax salary. This calculator uses the standard statutory method and does not apply the EV exemption, so for a qualifying electric car your real saving could be materially larger than shown here. Treat the EV case as a separate conversation with your lease provider.

Common mistakes to avoid

• Ignoring the residual (balloon) value. A novated lease ends with a required residual payment set by ATO guidelines. You must pay it, re-lease, or refinance, so budget for it rather than being surprised at the end.
• Assuming everyone saves the same. The benefit scales with your marginal rate. A high earner saves more per dollar packaged than someone in a lower bracket.
• Overlooking GST. Providers typically claim the GST credit on the car and pass on part of the benefit, but you cannot then also claim it elsewhere.
• Forgetting the car is still a depreciating asset. Packaging softens the tax cost, but a novated lease does not make an expensive car cheap in absolute terms.
• Not checking what happens if you change jobs. The lease is "novated" to your current employer; if you leave, the obligation reverts to you until a new employer takes it on, so factor in that flexibility risk.

Interpreting your result

Focus on the net annual benefit rather than the headline income-tax saving. The tax saving alone always looks attractive, but it is only half the picture: the residual FBT (or the after-tax ECM contribution that neutralises it) is the cost that offsets it. A positive net benefit means packaging beats paying cash for the same car over the same period; a benefit close to zero means the two are roughly line-ball, and the decision comes down to cash-flow convenience rather than tax. Remember too that the comparison assumes you would otherwise buy the identical car outright. If a novated lease tempts you into a more expensive car than you would have bought with cash, the tax saving can be swallowed by simply spending more.

Assumptions and limitations

It uses the statutory FBT method with a single statutory rate, assumes the lease cost bundles running costs, and does not model GST credits on the car, lease residual/balloon values, or the concessions for electric vehicles (which can be FBT-exempt). Novated lease packages vary between providers, treat this as a guide, not a quote.

This is general information, not financial or tax advice. Confirm the numbers with your lease provider and a registered tax agent.

About This Novated Lease vs Buying Calculator

Use this novated lease vs buying 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.