Novated Lease Calculator
See roughly how much tax a novated lease could save you, how the pre-tax and post-tax deductions split, and what changes if the car is an FBT-exempt EV.
Your details
Estimated annual tax saving
$2,619
Pre-tax deduction (per fortnight)
$315
Post-tax deduction (per fortnight)
$346
Total annual lease cost
$17,183
Uses the flat 20% statutory formula method with the Employee Contribution Method (ECM) structured to bring your employer's FBT liability to nil, the approach most Australian novated lease providers use. Doesn't include GST savings on the vehicle purchase, provider or admin fees, or the effect reportable fringe benefits can have on HECS-HELP repayments, the Medicare levy surcharge, or family payment income tests. Estimates only, not financial or tax advice, confirm exact figures with a novated lease provider and your payroll team.
How to use this calculator
- 1. Enter your annual salary before tax, and the full drive-away price of the vehicle you're considering.
- 2. Enter an estimate for annual running costs (rego, insurance, fuel or charging, servicing), your lease term, and the interest rate your provider quotes.
- 3. Turn on the electric or hydrogen vehicle toggle if your car qualifies, this removes the after-tax contribution entirely for eligible cars.
- 4. See your estimated annual tax saving, the pre-tax and post-tax deductions per fortnight, and the net cost of running the car this way.
How a novated lease actually saves you tax
A novated lease lets you pay for a car, including the finance and running costs, out of your pre-tax salary through your employer, rather than out of your take-home pay. Because the deduction comes off your salary before income tax is calculated, you pay less tax overall, that reduction in tax is the entire financial benefit of packaging a car this way rather than buying or financing it personally. The car itself doesn't get any cheaper to finance or run, the saving comes purely from the tax treatment.
Why you often pay some of it after tax too
Providing an employee with a car for personal use is a fringe benefit, and fringe benefits are normally subject to Fringe Benefits Tax (FBT), paid by the employer at a flat 47% rate on a taxable value. Under the statutory formula method almost all novated leases use, that taxable value is a flat 20% of the car's price. To avoid landing your employer with an FBT bill, most novated lease providers structure the lease so you make an after-tax contribution, called the Employee Contribution Method (ECM), equal to that taxable value. That contribution reduces the employer's FBT liability to nil, which is why a typical novated lease splits into a pre-tax portion and a smaller after-tax portion rather than being entirely pre-tax. Eligible electric and hydrogen vehicles under the luxury car tax threshold are the exception, they're FBT-exempt entirely, so there's no ECM contribution and the whole lease comes off your pre-tax pay.
FAQ
What's the difference between a novated lease and a car loan?
A car loan is a personal loan you repay entirely from your after-tax pay, and you own the car outright once it's paid off. A novated lease is a three-way agreement between you, your employer and a finance company, where repayments come from your pre-tax (and some after-tax) salary, and you don't own the car until you pay out the residual value at the end of the lease, if you choose to.
What is the Employee Contribution Method (ECM)?
It's the after-tax contribution you make toward the lease, structured to exactly offset the taxable value of the car under the FBT statutory formula method. This brings your employer's FBT liability on the car to nil, which is why most novated leases split into a pre-tax and a post-tax portion.
Are electric vehicles really FBT-exempt on a novated lease?
Yes, for now. Eligible battery electric and hydrogen fuel cell vehicles priced under the luxury car tax threshold for fuel-efficient vehicles are currently fully FBT-exempt, meaning the entire lease is paid pre-tax with no ECM contribution. Plug-in hybrids lost this exemption on 1 April 2025. The government has flagged the exemption narrowing from 1 April 2027 for vehicles over $75,000, but leases signed while the current rules apply are expected to be grandfathered for their full term.
Does a novated lease affect my HECS-HELP repayments or family benefits?
It can. The pre-tax amount you package is added back as a 'reportable fringe benefit' for the purposes of working out your HECS-HELP repayment income, the Medicare levy surcharge, and income tests for some family payments, even though it reduces your income tax. This calculator doesn't model that effect, factor it in separately if any of these apply to you.
What happens at the end of the lease?
You'll typically owe a residual value (a balloon payment set by ATO guidelines based on the lease term) if you want to keep the car. Most people either pay this out, refinance it, trade the car in, or start a new lease on a different vehicle.
Is a novated lease worth it if I don't drive much for work?
Unlike some older salary packaging arrangements, a modern novated lease doesn't require any work-related use or logbook, the tax treatment is the same whether the car is 100% personal use or not. Whether it's worth it comes down to your income (higher earners on higher marginal tax rates generally save more), the car's price, and how it compares to simply financing the car yourself.
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Disclaimer
This calculator uses the flat 20% statutory formula method with the Employee Contribution Method (ECM) structured to bring FBT to nil, the approach most Australian novated lease providers use. It doesn't include GST savings on the vehicle purchase, provider or administration fees, or the effect reportable fringe benefits can have on HECS-HELP repayments, the Medicare levy surcharge, or family payment income tests. This tool provides estimates only, is not financial or tax advice, and doesn't replace an exact quote from a novated lease provider or advice from your payroll team or a registered tax agent.