Novated Lease Calculator Australia (2026-27)

This novated lease calculator works out what a car package costs you after tax in Australia, using 2026-27 ATO rates. It shows your pre-tax and post-tax deductions, the FBT position, the electric car exemption, the residual payment and your estimated yearly saving compared with buying the same car from after-tax pay. It is built for employees comparing a quote, not for providers selling one.

What the novated lease calculator works out

A quote from a provider gives you one number, usually a deduction per pay. That number hides most of what matters. This calculator splits it into the parts that decide whether the lease suits you.

• Pre-tax and post-tax deductions per pay. The pre-tax part reduces your taxable income. The post-tax part is the contribution that covers FBT on a petrol, diesel or hybrid car.
• Take-home pay reduction. What actually leaves your bank account each pay after the tax saving.
• Income tax and GST saved per year. The two sources of saving, shown separately.
• Residual payment. The balloon you owe at the end, including GST.
• Reportable fringe benefits. The figure that appears on your income statement and can affect other income tests.

Every input has an “i” icon that explains it. You can model a car from one to five years, change the interest rate, set your own residual, enter stamp duty separately, choose when the lease starts, and enter each running cost separately. The calculator uses the same ATO tax calculator bracket logic as the rest of our Australian tools, so you can cross-check your tax with the Australia salary after tax calculator.

How a novated lease works

A novated lease is a three-way agreement between you, your employer and a finance company. The finance company owns the car and leases it to you. Your employer agrees to make the lease and running cost payments from your salary, and you keep driving the car. The word “novated” refers to the lease being transferred to your employer on top of your original agreement with the lessor.

Because the money comes out of your salary, part of the package is paid before income tax. That is where the income tax saving comes from. The employer also claims the GST on the car and on most running costs, so you pay the car cost without GST. That is the second saving.

The package usually bundles lease repayments with fuel or charging, registration, insurance, servicing and tyres. Your employer pays those bills as they fall due and deducts a steady amount each pay. At the end of the term you pay the residual, refinance it, or sell the car and use the proceeds.

The lease is tied to your employment. If you change jobs, your new employer may agree to take over the arrangement, or you may need to take the lease over personally or pay it out. Read the termination terms in your contract before you sign.

Worked examples: petrol and electric

These use a salary of $110,000, a five-year term, an 8% interest rate and the ATO minimum residual. Stamp duty is left out so the numbers stay simple, and running costs are listed under the table. You can enter the same figures to check the maths.

Running costs used: petrol car with $3,000 fuel, $900 registration, $1,800 insurance and $1,200 servicing a year; electric car with $800 charging, $700 registration, $1,800 insurance and $600 servicing a year. These are illustrations, not quotes.

The gap between the two is the FBT exemption. The petrol car needs a $10,000 a year post-tax contribution to cover FBT, so only part of the package is pre-tax. The electric car has no FBT, so the whole package comes out of pre-tax pay and the tax saving is much larger. If you are comparing fuel costs for a petrol car, the fuel cost calculator helps you set a realistic yearly figure, and the car insurance cost calculator does the same for cover.

How to calculate FBT on a novated lease

For a car that is not exempt, the taxable value under the statutory formula is a flat 20% of the car’s base value. The base value is the cost price including GST and dealer delivery, but not registration or stamp duty. The ATO has applied the flat 20% to all car fringe benefits since 1 April 2014, and it reduces the base value by one-third once the car has been owned or leased for four years at the start of an FBT year. Employer FBT is then 47% of the taxable value multiplied by a gross-up rate. The rate is 2.0802 when the provider can claim GST credits and 1.8868 when it cannot.

Take the $50,000 petrol car above. The taxable value is $50,000 × 20% = $10,000. If your employer paid the FBT itself, it would owe about $10,000 × 2.0802 × 47% = $9,777 a year. To avoid that, most packages use the employee contribution method: you pay the taxable value, $10,000 a year, from after-tax pay. That removes the FBT liability and is what the calculator assumes.

The FBT year runs from 1 April to 31 March, which is different from the income tax year. The ATO also publishes a car fringe benefits calculator for employers, and the rates above come from its FBT rates and thresholds page.

Electric cars and the FBT exemption

An EV novated lease calculator needs to treat electric cars differently, because an eligible electric car pays no FBT. According to the ATO, the exemption applies when all of these are true:

• The car is a battery electric or hydrogen fuel cell vehicle.
• It was first both held and used on or after 1 July 2022.
• A current employee or their associate uses it.
• Luxury car tax was never payable on it. In practice the GST-inclusive value, before stamp duty and registration, must be at or below the fuel-efficient threshold, which is $91,661 for 2026-27 and was $91,387 for 2025-26.

The exemption covers registration, insurance, repairs and the cost of charging. A home charger is not covered. Plug-in hybrids stopped qualifying from 1 April 2025, except where a financially binding commitment existed before that date. That is why the calculator has a separate option for those cars. If you charge at home, the ATO’s shortcut rate for the FBT year starting 1 April 2026 is 5.47 cents per kilometre.

You can check the current thresholds on the ATO’s car thresholds page.

Residual (balloon) values

Every novated lease ends with a residual payment. The ATO’s long-standing guidance (ATO ID 2002/1004) sets a minimum percentage of the car’s cost, worked out as 75% less 75% divided by an eight-year effective life for each year of the term. Providers apply it to the GST-inclusive car price, before stamp duty.

The residual includes GST and is paid from after-tax money. A shorter term means larger repayments now and a bigger balloon at the end, and a longer term lowers repayments but costs more interest. The calculator uses these minimums by default. If your quote uses a higher residual, enter it, and the tool will reject anything lower than the ATO minimum for that term.

Reportable fringe benefits and what they affect

An exempt electric car is not exempt from reporting. The grossed-up value of the benefit goes on your income statement as a reportable fringe benefit once the taxable value passes $2,000. It does not increase your income tax, but the ATO counts it in some income tests, such as the Medicare levy surcharge and HELP repayments. In the electric example above, the reportable amount is about $22,642 a year.

If you have a study debt, run your numbers through the HECS-HELP repayment calculator with that extra income included. For a petrol car on the employee contribution method, the reportable amount is usually nil because your post-tax contribution offsets the taxable value.

Is a novated lease worth it?

It can be, and the answer depends on three things: your marginal tax rate, whether the car is exempt, and how competitive the provider’s finance and fees are.

• It tends to help when you are in a higher tax bracket, plan to keep the same employer, and are buying an eligible electric car.
• Be careful if you may change jobs soon, if you are on a lower income where the tax saving is small, or if the interest rate and fees are well above what you could borrow elsewhere.
• Compare like for like. Ask for the interest rate, the admin fee, the residual and the price of each running cost line. Run a plain car loan through the loan calculator to see how the rate compares.

Before you commit, check that the repayment fits your wider budget with the Australia cost of living calculator, and browse the rest of our Australia financial calculators.

Assumptions and limits

• Results are estimates for the 2026-27 financial year for Australian tax residents. They are not a quote or financial advice.
• Income tax uses the 2026-27 resident rates (0%, 15%, 30%, 37%, 45%), the low income tax offset and a flat 2% Medicare levy. The low-income Medicare levy reduction is not applied. See the ATO’s tax rates for residents.
• The model assumes the lessor and employer claim the GST on the car and on running costs (except registration) in full, which is how providers usually quote. Your quote is the final word.
• The announced electric car changes are modelled only through the start-date option, and the rules for arrangements that start before 1 April 2029 may be set out in later legislation.
• Lease repayments are calculated monthly in arrears. Some providers use advance payments, which changes the figures slightly.
• The petrol car calculation uses the 20% statutory formula and the employee contribution method. Business-use reductions are not modelled.
• The one-third base value reduction after four years and the part-year in the first FBT year are not modelled. Ignoring the reduction slightly understates the saving on a five-year lease.

Frequently asked questions

How are novated lease payments calculated?

The provider finances the car price without GST, charges interest, and leaves the residual to pay at the end. It adds your running costs, then splits the total into a pre-tax and a post-tax deduction taken from each pay.

How much can I save with a novated lease?

It depends on your salary, the car price and whether the car is FBT exempt. In the examples above, the saving was about $3,100 a year for a $50,000 petrol car and about $6,000 a year for a $60,000 electric car. Enter your own quote to see your figure.

How long is a novated lease?

Terms from one to five years are typical, and the ATO’s minimum residual table covers that range. Longer terms lower the repayment, and shorter terms cost less interest.

Do I pay FBT on a novated lease?

On a petrol, diesel or hybrid car, FBT applies, and it is usually covered by a post-tax contribution from you. An eligible electric car is exempt from FBT, though the benefit is still reportable.

What happens to a novated lease if I leave my job?

The lease stays with the finance company, but the employer arrangement ends. Your new employer may take over the novation, or you may take over the lease personally or pay it out. The contract sets out the options.