Novated lease calculator

How this was checked

Checked against

Cases worked by hand from the published rules, without using the calculator

Result

All 73 cases match

Last run

31 October 2026

A match shows the calculator gives the expected answer in those cases, not that it covers your situation. Every check we run

How a novated lease works

A novated lease is a car lease between you and a finance company that your employer agrees to take on while you work there. The ATO treats it as a car your employer provides, so it is a fringe benefit. Your employer pays the lease and the bundled running costs from your pay under a salary sacrifice arrangement, which lowers your taxable income and the tax taken from each pay.

Two things separate it from a car loan. The payments are partly or fully pre-tax, and GST is treated differently: the finance company can claim a GST credit on the car, so you finance less than the sticker price, and GST credits on running costs can be passed to you. Against that, FBT may apply, and you owe a residual at the end.

A novated lease depends on your job. If you leave, or go on unpaid leave, the ATO's examples show the novation ending and the payments falling back on you. Not every employer offers novated leases. For the wider rules on packaging pay, see the salary packaging calculator and the salary sacrifice calculator.

Worked example

A $100,000 salary, a $60,000 car, 5 years, 9.5% on both the lease and the loan, $4,500 of running costs and $300 of lease fees a year. The loan has a balloon equal to the lease residual, so both end with the same lump sum.

FBT makes the gap between these rows. With post-tax contributions the petrol car pays no FBT, but $12,000 a year of the package moves to after-tax pay. Left in the package, the FBT of $11,732 a year takes the lease above the loan. Every total includes the $16,878 residual payout, and you own the car at the end of each. These figures are before HELP, the Medicare levy surcharge and any lost employer super. The rate on a real quote changes these results, so check yours: the calculator shows what one percentage point on the lease rate does to the total.

FBT and the employee contribution method

FBT on a car is usually worked out with the statutory formula: 20% of the car's base value, whatever the kilometres. That is why this calculator does not ask how far you drive. Base value is the cost price including GST and any luxury car tax, without registration or stamp duty. For the FBT year to 31 March 2027 the taxable value is grossed up at 2.0802 and taxed at 47%.

On a $60,000 car that is a $12,000 taxable value and $11,732 of FBT a year if nothing else is done. Under the employee contribution method you pay $12,000 a year from after-tax pay, which takes the taxable value to nil. Your employer owes GST of 1/11 on that contribution, which is why the pre-tax part of the package does not fall by the full amount. Try both settings under "How FBT is covered" in the calculator.

The electric car rule, and the change before Parliament

Under section 8A of the FBT Act, a car is exempt if it is a battery or hydrogen fuel cell electric car, first held and used from 1 July 2022, used by a current employee, and luxury car tax has never been payable on it. For 2026-27 the fuel-efficient threshold is $91,661 and the threshold for other cars is $80,809. Plug-in hybrids lost eligibility from 1 April 2025, apart from those already covered by a binding commitment made before that date.

The statutory review of the Electric Car Discount reported on 5 May 2026. Schedule 5 of the Treasury Laws Amendment (Tax Reform No. 4) Bill 2026 would replace the exemption with a discount. The Bill passed the House of Representatives on 29 October 2026 and is not yet law, so the rows marked Bill are proposals.

A commitment is the point at which the deal is binding and cannot be backed out of, not the delivery date. Under the Bill, a car keeps its treatment until that commitment ends. The Explanatory Memorandum says refinancing, changing the term or residual, adding accessories that raise the payments, and changing employers all count as a new commitment. The ATO's plug-in hybrid guidance also treats a break in the novation, such as unpaid leave that ends it, as a new commitment. The Explanatory Memorandum does not list that case, so applying it to electric cars is our inference from the plug-in hybrid example, not a stated rule. The fuel-efficient limit in a future year will be whatever is set for that year; the calculator uses the 2026-27 figure.

Reportable fringe benefits

An exempt electric car is still reported on your income statement. On the statutory formula, the reportable amount is worked out as if the 20% formula applied, then grossed up at 1.8868; under the operating cost method it would differ. On a $60,000 car with no post-tax contribution that is $22,642 a year. It is not taxed, but it counts towards HELP repayments, the Medicare levy surcharge, Division 293 tax and family payments.

In the example, taxable income falls to $84,206, but repayment income is $106,848. With a HELP debt, repayments rise $1,027 a year, which takes the fortnightly cost from $413 to $453, although those repayments do reduce the debt. Without hospital cover, that income is above the $105,000 single threshold, adding $1,068 a year of Medicare levy surcharge. The calculator can count both. The Bill would keep the 20% basis for reporting, even where the 15% formula applies to the FBT.

Employer super

The super guarantee is 12% of qualifying earnings. The ATO's example shows salary sacrificed to a novated lease coming out of qualifying earnings, unlike salary sacrificed into super. On the example's $15,794 sacrifice that is $1,895 a year of super at risk, and $9,476 over 5 years; on the petrol car with post-tax contributions it is $586 a year. Your employer can agree to pay super on your salary before the sacrifice, and an award or agreement may require it. Check your contract, and use the setting in the calculator.

GST and the car limit

The GST credit on a car is capped at one-eleventh of the car limit. For 2026-27 the car limit is $69,883, so the most that can be claimed is $6,353. A $60,000 car has a credit of $5,455, leaving $54,545 to finance. The cap only matters on a dearer car. You can use the GST calculator to split any price.

The residual, or balloon

A novated lease leaves a lump sum at the end. It should reflect the car's likely market value, and it cannot be lower than the ATO's minimum for the term unless a fair estimate of that value supports a lower figure. A higher residual lowers each payment and raises the amount due at the end.

You can pay the residual, sell the car or re-lease it, but the lease cannot include an agreement that you will buy the car. Lease providers usually quote the residual before GST and add GST on payout. We could not confirm that from an ATO source, so it is a setting in the calculator. A residual is paid from after-tax money.