Novated Lease Calculator 2026-27
Compare the real cost of salary packaging a car.
Calculate the tax benefit of a novated lease versus buying a car outright. Shows pre-tax salary packaging saving, FBT cost, GST saving, and your real net benefit. ATO 2026-27.
Estimates only. Actual saving depends on employer, lease terms, and running costs structure.
How a novated lease works in Australia
Three-way agreement
A novated lease is between you, your employer, and a finance company. Your employer pays the lease from pre-tax salary, reducing your taxable income. Running costs (fuel, insurance, rego, servicing) can also be bundled pre-tax.
The saving
Pre-tax packaging saves income tax at your marginal rate, minus any FBT cost. EVs under $91,661 (2026-27 LCT threshold) are FBT-exempt from 1 July 2022.
How novated lease tax savings are calculated
Income tax saving
Each $1 of pre-tax packaging reduces taxable income by $1. At 30%, $10,000 package saves $3,000/yr. At 37%, $3,700/yr.
GST saving on purchase
Employer claims GST ITC on the vehicle (1/11th of price), passed back to you. On a $50,000 car: ~$4,545 GST saving, effectively reducing purchase cost.
| Marginal rate | $15k package saving |
|---|---|
| 30% | $4,500/yr |
| 37% | $5,550/yr |
| 45% | $6,750/yr |
Fringe Benefits Tax on novated leases
Statutory formula method
FBT taxable value = original cost × 20% statutory rate × days/365. The employer pays FBT at 47%. Under the employee contribution method (ECM), you make an after-tax contribution equal to the taxable value, reducing FBT to nil. The calculator models ECM for non-EV vehicles.
Electric vehicle FBT exemption from 1 July 2022
Zero FBT on eligible EVs
BEVs, plug-in hybrids, and hydrogen fuel cell vehicles first used on or after 1 July 2022, valued under the LCT threshold ($91,661 in 2026-27), are FBT-exempt. This makes EVs significantly more tax-efficient than equivalent ICE vehicles under a novated lease.
Reportable FBT
Even exempt EVs must be reported as a reportable fringe benefit on your payment summary. This can affect income-tested thresholds (MLS, HECS, family payments) — check with your accountant.
Novated lease worked examples 2026-27
EV vs petrol comparison
$60,000 vehicle, 5-year lease, 20,000 km/year, $90,000 salary (30% marginal rate). Fully maintained lease including fuel/charging, insurance, rego, servicing, tyres.
| Scenario | Annual pre-tax cost | FBT | Tax saving | Net annual cost |
|---|---|---|---|---|
| Petrol SUV — Statutory Method | $15,800 | $3,360 | $5,135 | $14,025 |
| Petrol SUV — Logbook Method (50% business) | $15,800 | $1,680 | $5,135 | $12,345 |
| Eligible EV (FBT-exempt) | $15,200 | $0 | $4,940 | $10,260 |
The eligible EV saves roughly $3,765/year vs the equivalent petrol vehicle, primarily because of the FBT exemption — making EVs the most cost-effective novated lease option in 2026-27.
Statutory Method vs Logbook Method — which FBT method to use
Statutory Method (default)
FBT taxable value = vehicle base value × 20%. The 20% rate is fixed regardless of business use, and no record-keeping is needed beyond the vehicle base value. Best for personal/commuting-heavy use where business kilometres are low.
Logbook Method (business use)
FBT taxable value = (operating cost) × (1 − business use %). Requires a valid 12-week logbook record once every 5 years, plus odometer readings. Best for vehicles used substantially for business — even 30%+ business use typically beats the Statutory Method.
When to use each
| Business use % | Recommended method | Why |
|---|---|---|
| 0-15% | Statutory | Low business use makes logbook complexity unjustified |
| 16-30% | Compare both | Crossover region — calculate for your specific vehicle and km |
| 31-100% | Logbook | Logbook always wins above 30% business use |
Logbook process
Record every trip for 12 consecutive weeks: date, start odometer, end odometer, purpose, destination. Apps like Driversnote, Logbook Me, and ATO Smart Log automate this. The 12-week sample is valid for 5 years if the work pattern stays similar.
Which EVs qualify for the novated lease FBT exemption 2026-27
Three eligibility tests
(1) The vehicle must be a battery electric (BEV), plug-in hybrid (PHEV), or hydrogen fuel cell vehicle. (2) First held and used on or after 1 July 2022. (3) Below the LCT threshold for fuel-efficient vehicles ($91,661 in 2026-27). PHEVs lose eligibility from 1 April 2025 — only fully battery-electric and hydrogen vehicles qualify for new leases entered into after that date.
Popular eligible models
| Vehicle | Type | Approx drive-away | Eligible (post-April 2025)? |
|---|---|---|---|
| Tesla Model 3 RWD | BEV | $60,000 | Yes |
| Tesla Model Y RWD | BEV | $67,000 | Yes |
| BYD Atto 3 | BEV | $48,000 | Yes |
| BYD Seal | BEV | $55,000 | Yes |
| Polestar 2 | BEV | $72,000 | Yes |
| MG4 | BEV | $40,000 | Yes |
| Mitsubishi Outlander PHEV | PHEV | $60,000 | No (PHEV cut-off) |
| BMW iX1 | BEV | $85,000 | Yes |
Charging costs
Home charging electricity costs can be included in the lease's pre-tax bundle if the employer/lease provider supports it. Some leases include a home charger installation as part of the package — typically $1,500-$2,500 pre-tax.
How novated lease payments appear on your salary
Pre-tax and post-tax components
The Employee Contribution Method (ECM) splits your lease payments into two parts. The pre-tax portion is the lease payment + running costs minus FBT-equivalent contribution. The post-tax portion is roughly the FBT taxable value contribution.
Example: $1,500/month lease, $250 FBT contribution
- Gross salary — $7,500/month (90,000/year)
- Pre-tax lease deduction — $1,250 (reduces taxable income)
- Post-tax FBT contribution — $250 (paid from after-tax pay)
- Taxable income — $6,250/month, taxed at marginal rate
- Net effect vs unleased pay — Tax reduction from $1,250 deduction is approximately $375 (30% marginal). So net cost of vehicle is $1,500 − $375 = $1,125/month, vs $1,500/month if buying outright with after-tax money.
Effect on HECS and government payments
The reportable fringe benefit amount (the grossed-up FBT taxable value) is added to your 'adjusted taxable income' for HECS, Medicare Levy Surcharge, family payments, and other income-tested thresholds. Even if FBT itself is zero (EVs), the reportable benefit remains. This can shift you into a higher HECS repayment bracket or above an MLS threshold.
What happens at the end of your novated lease
ATO minimum residual values
The ATO sets minimum residuals to prevent leases being used as disguised loans. For a 5-year lease the minimum residual is 28.13% of the original price; for 4 years it's 37.5%; for 3 years 46.88%; for 2 years 56.25%; for 1 year 65.63%.
Three end-of-lease options
1. Pay the residual and keep the car. You can pay the residual in cash, or finance it via a balloon loan. The residual is fully paid from after-tax money — there is no tax benefit on this final step.
2. Re-lease (refinance) the residual. Sign a new 2-3 year novated lease using the residual as the starting price. Useful if you want to keep the car but smooth the payment.
3. Sell the car and clear the residual. If you sell to a private buyer for more than the residual, the surplus is income-tax-free (consider it a tax-free profit). If you sell for less than the residual, you cover the shortfall from after-tax money.
Resale value risk
If you set an aggressive (low) residual, monthly costs are higher but the lease has less risk. If you set a high residual, monthly costs are lower but you risk being underwater at lease-end if the market drops. EV resale values have fallen significantly through 2024-25 — many EV novated leases are entering negative-equity territory.
❓ Frequently asked Frequently asked questions about novated leases
Is a novated lease worth it?
Most beneficial when: marginal rate is 30%+, or the vehicle is an EV (no FBT), or high kilometres reduce FBT under logbook method. Lower incomes may not justify administrative complexity.
Can I get a novated lease on a used car?
Yes. Lenders may restrict age and mileage. FBT still applies (based on market value). GST ITC only available on new vehicle purchases.
What happens if I change jobs?
The lease reverts to a consumer lease — you become personally liable. Some employers allow novation to a new employer. Check termination clauses before signing.
Are all running costs included?
A fully maintained lease bundles fuel, rego, insurance, servicing, tyres pre-tax. A finance-only lease covers just payments. Fully maintained gives larger tax saving.
Do PHEVs still qualify for the FBT exemption?
For new leases entered into on or after 1 April 2025, no — plug-in hybrids lost the FBT exemption from that date. Only fully battery-electric vehicles (BEVs) and hydrogen fuel cell vehicles qualify for new leases. Existing PHEV leases signed before 1 April 2025 retain their exemption for the original lease term.
Will the FBT exemption affect my HECS or family payments?
Yes — even though no FBT is payable on an EV novated lease, the reportable fringe benefit amount is added to your 'adjusted taxable income' for HECS repayments, Medicare Levy Surcharge, and family payment thresholds. This can shift you into a higher HECS bracket or trigger MLS — worth modelling with your accountant before signing.
What is FBT and why does it apply to my car?
Fringe Benefits Tax (FBT) is a tax paid by employers on non-cash benefits provided to employees. A novated lease is a non-cash benefit, so FBT applies unless an exemption (like the EV exemption) is in place. The employer collects an Employee Contribution from your post-tax pay to offset FBT, so the employer's FBT liability is typically nil.
Can I novate a car I already own?
Yes — this is called a "sale and leaseback." You sell your existing car to the lease provider at agreed market value (you receive the proceeds), then enter a novated lease on the same car. Useful for unlocking equity from a paid-off car, but check the GST and FBT implications carefully — these can outweigh the tax savings on older or lower-value vehicles.
What's the maximum vehicle value for a novated lease?
There is no statutory cap, but practical limits apply: vehicles above the Luxury Car Tax (LCT) threshold attract additional restrictions on depreciation and GST input credits, and EVs above $91,661 (2026-27 fuel-efficient threshold) lose the FBT exemption. Most lease providers cap individual deals at $150,000-$200,000.
Can I claim GST on a novated lease?
You personally cannot — but the lease provider claims back the GST on the vehicle purchase and on running costs, effectively passing the saving to you through lower payments. For an EV under the LCT threshold, the GST saving is typically $5,000-$8,000 on the vehicle alone.
What happens if I'm made redundant during the lease?
The novation agreement ends — you become personally responsible for ongoing lease payments. Some lease providers offer income protection insurance to cover this scenario; check the lease terms carefully and consider 3-6 months of payments in your emergency fund before signing.
Is the residual at lease-end tax-deductible?
No. The residual is paid with after-tax money. If you sell the car at end-of-lease for more than the residual, the surplus is a tax-free private gain. If you sell for less, you cover the shortfall personally with no tax benefit.
Where these figures come from
Income figures on this page are drawn from the Australian Taxation Office (ATO), the Fair Work Commission (minimum wage and awards), and the Australian Bureau of Statistics (national earnings).
- PAYG withholding & income tax rates — ATO — Individual income tax rates.
- Superannuation Guarantee rate — ATO — Super guarantee percentage.
- National minimum wage — Fair Work Ombudsman — Minimum wages.
- Average weekly earnings — ABS — Average Weekly Earnings.
- Medicare levy — ATO — Medicare levy.
Last checked: July 2026. Rates and thresholds are reviewed against the source of record each November, when annual adjustments for the following tax year are published.
Select the question that matches where you are right now.
Your result shows the income breakdown based on the salary, hours, or payment details you entered — using current tax rates and standard employment conditions.
Use this to compare job offers, understand your effective hourly rate, or see how a pay rise flows through to take-home pay. Adjust inputs to model different scenarios.
Not a payslip or employer commitment. Actual pay depends on your specific employment agreement, deductions, and employer calculations.
Uses current tax rates and standard employment conditions. All calculations run in your browser — no data is sent to any server.
Income calculations are driven by gross pay, tax bracket, and any salary packaging or deductions. The gap between gross and net widens as income rises due to progressive tax rates.
The difference between your gross salary and take-home pay includes income tax, Medicare levy, and any HECS/HELP repayments. Higher income means a larger percentage goes to tax.
For hourly workers, overtime rates, casual loading (typically 25%), and penalty rates significantly affect the effective annual income.
Salary sacrifice to super, novated leases, or FBT-exempt packaging reduces taxable income — changing the effective tax rate and take-home split.
To improve your income position, focus on reducing tax drag, negotiating better terms, or restructuring how you receive compensation.
Consider super, leave loading, flexible work, and salary packaging as part of total compensation — not just base salary.
Directing pre-tax income to super or other concessional items reduces your tax bill and increases effective compensation.
Converting salary to an hourly rate (or vice versa) helps compare roles with different structures on a like-for-like basis.
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