The Independent Novated Lease Calculator (Australia)

Why an independent calculator — and what the vendor ones don't show

Almost every novated lease calculator on page one of Google belongs to a lease provider (SG Fleet, RemServ, Toyota Fleet, FleetPartners and others). Their job is to produce a savings headline and route you into a quote form — RemServ's own terms state its calculator “uses some generic taxation scenarios” and “does not use or consider any individual's own financial circumstances at all”. None of them publishes the interest rate, financier margin or residual assumptions behind the weekly figure they show you.

This calculator is different by construction: it is not affiliated with any lease provider, there is no quote form and no lead capture, and every line of the math — FBT statutory value, gross-up, ECM offset, GST credit, income tax and Medicare levy — is printed on screen so you can check it against your own payslip or a provider's quote. If a vendor quote disagrees with these numbers, the difference is their finance margin and fees: ask them to break it down.

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.

Novated lease vs car loan vs paying cash — an honest comparison

Against paying cash, the lease's edge is structural: pre-tax salary packaging (worth A$1,120/year in income tax and Medicare on Profile A above) plus the employer's GST credit (A$1,227 a private buyer never recovers on a A$50,000 car). Against a car loan, the same tax levers apply, but the lease's financing cost is usually higher than a good secured car loan rate — lease marketing material typically benchmarks against a ~7.99% comparison loan while never disclosing the lease's own implicit rate. The honest method: get the total annual lease cost from a real quote, enter it above, and compare the net cost line against your loan repayments plus running costs paid from after-tax pay.

When the lease loses: if your marginal tax rate is low (the pre-tax lever shrinks), if you'd keep the car well beyond the lease term (financing and residual churn outweigh the tax saving), or if the quoted lease cost carries a fat margin — the tax math can't rescue an expensive quote. When it wins: mid-to-high marginal rates, an eligible EV under the FBT-exemption cap (the whole package goes pre-tax), or an employer whose provider passes through competitive financing.

On-road costs differ by state — check what your drive-away price includes

Vehicle stamp duty and registration on the same car differ by hundreds to thousands of dollars between states (each state's revenue office sets its own motor-vehicle duty schedule, with EV concessions in some jurisdictions), and every national novated lease calculator quietly rolls this into an opaque “drive-away” figure. Before comparing quotes, ask the provider to itemise duty, registration and CTP for your state — and make sure two quotes you're comparing assume the same one. To sanity-check the tax side of this page, pair it with the Australian income tax calculator (your marginal rate drives the pre-tax saving) and the super calculator if you're weighing salary-sacrificing into super instead of a car.