Australian Novated Lease Calculator
On a A$50,000 petrol/diesel car and a A$100,000 salary, using the Employee Contribution Method cuts FBT from A$9,777 to $0, for an estimated A$7,473/year saving versus buying the same car with cash. An eligible electric car under A$91,661 pays $0 FBT with no ECM needed at all — but still generates a Reportable Fringe Benefit Amount of about A$20,755. Enter your own salary and vehicle price below; every step of the FBT/ECM/GST math is shown, not hidden behind a quote form.
$7,473 a year vs buying the same car with cash
FBT due: $0 (reduced to nil via ECM) · Net annual cost of the lease: $12,380
Petrol/diesel vehicles don't qualify for the FBT exemption — FBT applies unless reduced via ECM. Your marginal tax rate (income tax + Medicare levy) is 32.0%.
The math, step by step (no black box)
| Statutory taxable value (20% × price) | $10,000 |
| Grossed-up value (Type 1, ×2.0802) | $20,802 |
| FBT if nothing offsets it (×47%) | $9,777 |
| Employee contribution (ECM, post-tax) | −$10,000 |
| FBT actually due | $0 |
| Pre-tax package (salary sacrifice) | $3,500 |
| Income tax + Medicare saved on that pre-tax package | −$1,120 |
| GST recovered by the employer on the pre-tax lease/running-cost payments (est.) | $318 |
Novated lease vs buying the same car with cash
Reportable Fringe Benefit Amount (RFBA) — a gotcha most calculators skip
At these numbers, the taxable value after ECM is at or under the $2,000 reporting threshold, so no RFBA applies.
Using ECM to bring FBT to nil also brings the RFBA to nil, because RFBA is based on the taxable value after your contribution.
FBT rate, statutory formula rate, gross-up rates, RFBA threshold, the electric-car FBT exemption and the fuel-efficient LCT threshold are FBT2027 (1 April 2026 – 31 March 2027) figures verified against ato.gov.au. Resident tax brackets are the legislated FY2026-27 scale (15% second-bracket rate), corroborated against budget.gov.au as the ATO's own resident-rates page had not yet published the FY2026-27 table at the time of writing. Educational estimate — actual lease pricing, residual values and provider fees vary; this is not financial advice. How we calculate →
How a novated lease works, tax-wise
A novated lease is a three-way deal (deed of novation) between you, your employer and a finance company: your employer takes over the lease payments and deducts them from your salary — mostly before tax (salary sacrifice) — then pays the finance company. Because part of your pay is diverted before income tax and Medicare levy are calculated, you pay tax on a smaller taxable income.
Giving an employee the private use of a car this way is a car fringe benefit, so it attracts Fringe Benefits Tax (FBT) — a tax the employer pays, calculated under the statutory formula method used by virtually every novated lease: taxable value = 20% of the car's GST-inclusive price, regardless of kilometres driven. That taxable value is then grossed up and taxed at a flat 47%. Two mechanisms bring the real cost down: the Employee Contribution Method (ECM) for petrol/diesel cars, and the electric car FBT exemption for eligible EVs — both explained below.
FBT and the statutory formula method, with real numbers
For a A$50,000 car: taxable value = A$10,000 (20% of price) → grossed up at the Type 1 rate (×2.0802, used when the employer claims GST credits, the normal novated-lease case) = A$20,802 → FBT at 47% = A$9,777 for the FBT year ending 31 March 2027 (FBT2027). That FBT liability sits with the employer, but in a salary-packaging arrangement it flows through to what you actually save — which is why almost every novated lease uses ECM to bring it to zero.
The Employee Contribution Method (ECM), explained
ECM lets you make a post-tax contribution toward the car's running costs that reduces the taxable value dollar for dollar. Contribute an amount equal to the full taxable value (A$10,000 in the example above) and FBT drops from A$9,777 to $0. The catch: that contribution comes from your after-tax pay, not pre-tax, so it isn't itself tax-effective — its job is purely to cancel out the FBT line. The real saving comes from two other levers: the income tax and Medicare levy you avoid on whatever portion of the lease and running costs is salary-sacrificed pre-tax, and the GST your employer recovers on the lease payments and running costs (see below).
Only post-tax contributions count for ECM — pre-tax salary-sacrifice amounts don't reduce the taxable value, because they're what creates the fringe benefit in the first place.
The electric car FBT exemption — the real angle vendor calculators bury
A battery electric or hydrogen fuel-cell vehicle (BEV/FCEV) first held and used on or after 1 July 2022, priced at or under the FY2026-27 fuel-efficient luxury car tax threshold of A$91,661, gets a 100% FBT exemption — no ECM required at all, for the whole of FBT2027. Plug-in hybrids (PHEVs) are no longer eligible — the exemption ended for PHEVs from 1 April 2025, aside from a narrow transitional carve-out for arrangements already in place before that date.
The gotcha: even though FBT payable is $0, the employer must still calculate the notional taxable value as if the car weren't exempt, and if that value's Type-2 grossed-up figure exceeds $2,000 it's reported as a Reportable Fringe Benefit Amount (RFBA) on your income statement. On a A$55,000 EV that's about A$20,755. RFBA doesn't add to your income tax — but it does count toward the Medicare Levy Surcharge income test, HELP/HECS compulsory repayment income, and child-support assessable income. If you're close to any of those thresholds, an EV novated lease can tip you over even though your tax bill on paper looks unaffected. Vendor calculators almost never surface this.
A tier is coming, but it isn't law yet. Announced at the 2026-27 Federal Budget (5 May 2026): a value-tiered FBT discount would replace the full exemption — EVs ≤ $75,000 keep the 100% discount, EVs priced $75,000-$91,661 (below the fuel-efficient LCT threshold) would get only a 25% discount. This is NOT yet law (ATO: 'not yet law' as at 14 May 2026) and, if legislated, would apply from 1 April 2027 at the earliest (FBT2028), with existing/already-novated leases grandfathered. The calculator below uses CURRENT law (100% exemption, no $75,000 tier) for the whole of FBT2027.
GST — the other half of the saving
On a genuine lease (unlike an outright purchase), the 1/11th GST-credit cap doesn't apply: your employer claims a GST credit on each lease payment in full, and generally on running costs too. That's why salary-packaging a car is materially cheaper than buying the same car privately — a private buyer pays GST with no credit available. On a A$50,000 car, that's roughly A$1,227 of GST a cash buyer can never claim back.
Is it worth it? Two profiles, calculated
Profile A — ICE, A$100,000 salary, A$50,000 car, ECM on: pre-tax package A$3,500, income tax + Medicare saved A$1,120, FBT due $0, net annual cost of the lease A$12,380 — an estimated A$7,473/year saving versus the A$19,853 of gross salary a cash buyer would need for the same spending power at the same marginal rate (32.0%).
Profile B — EV, A$100,000 salary, A$55,000 car, no ECM needed: FBT due $0, pre-tax package A$12,500, RFBA A$20,755 (relevant here because this profile has a HELP debt and no private hospital cover, so both RFBA warnings apply), net annual cost A$8,500 — an estimated A$9,882/year saving versus buying cash. The whole budget can be salary-sacrificed pre-tax because there's no FBT to offset with a post-tax ECM contribution.
Use the calculator above with your own salary, vehicle price and running-cost estimates — the FBT, ECM, GST and income-tax lines all update, so you can see exactly which lever is driving the saving instead of a single black-box number.
Frequently asked questions
How is novated lease fringe benefits tax calculated?
FBT on a novated lease uses the statutory formula method: taxable value = 20% of the car's GST-inclusive price (e.g. A$10,000 on a A$50,000 car). That's grossed up at 2.0802 (Type 1, employer claims GST credits) and taxed at a flat 47% — A$9,777 in this example, for FBT2027 (1 April 2026 - 31 March 2027). Most novated leases then use the Employee Contribution Method to bring this to $0.
What are the pros and cons of novated leasing?
Pros: part of the car's cost comes off your salary before income tax and Medicare levy, the employer's GST credit on lease payments removes the GST a private buyer can't recover, and eligible EVs are 100% FBT-exempt. Cons: you're committed to the lease term, the residual (balloon) payment is due at the end regardless of the car's actual value, and — for EVs especially — the Reportable Fringe Benefit Amount can affect HELP/HECS repayments or the Medicare Levy Surcharge even when FBT itself is $0.
What is the residual value on a novated lease?
The residual (or balloon) is the amount owing at the end of the lease term, set as a percentage of the vehicle's original price and increasing with a shorter term. It isn't an ATO-fixed figure for consumer novated leases — get the exact residual quoted by your provider before comparing lease costs; this calculator lets you enter your own annual lease cost rather than assuming one.
How do novated lease interest rates work?
The finance company charges interest (implicit in your quoted lease payment) on the amount financed after any deposit, similar to a car loan, with the residual value due at the end. Rates are set by the financier, not the ATO, and vary by provider and your credit profile — always compare the total annual lease cost quoted, not just the headline rate.
What happens at the end of a novated lease?
You typically pay the residual value to keep the car (refinancing it if you want to keep salary-packaging it), trade it in, or return it and start a new lease. The exact options depend on your finance provider's contract.
Can I novate a used car?
Generally yes, subject to your employer's and the finance provider's policies (age and condition limits are common) — this calculator works the same way for a used car's drive-away price, ICE or EV.
How do GST novated lease savings work?
Because your employer (registered for GST, leasing the car as part of paying your remuneration) claims a GST credit on each lease payment — not capped at 1/11th the way an outright purchase is — the amount you effectively package is GST-free to you, unlike a private purchase where GST is embedded with no credit available (about A$1,227 on a A$50,000 car).
Is a novated lease just salary sacrificing?
Mostly, yes — the lease and running costs are largely paid via pre-tax salary sacrifice. The difference from ordinary salary sacrifice is the FBT/ECM/GST mechanics layered on top because a company car is a fringe benefit, plus (for eligible EVs) the FBT exemption that removes that layer almost entirely.
Researched & verified by the Calcuris Data & Research Team. How we build and check our tools →