Novated Lease Calculator

A novated lease is a three-way agreement between you, your employer, and a leasing company. Your lease payments and running costs come out of your pre-tax salary — meaning you pay income tax on a lower amount.

For someone on a 30% marginal tax rate, every $1 packaged saves 32 cents (30% income tax + 2% Medicare). For higher earners on 47% marginal rates, the saving is 49 cents per dollar packaged.

You also save the GST on the car (claimed back by the leasing company) and on running costs. Combined, novated leases typically save 20–30% of the total cost of vehicle ownership.

From 1 July 2022, fully electric vehicles (BEVs) and qualifying plug-in hybrids (until 2025) below the Luxury Car Tax (LCT) threshold are completely exempt from Fringe Benefits Tax (FBT).

For 2025–26, the LCT threshold for EVs is $91,387. Below this, you can package a brand-new EV entirely from pre-tax salary with no FBT liability — by far the most generous tax break in the Australian salary packaging system.

For petrol/diesel/regular hybrid cars, FBT applies. Most providers zero it out using the Employee Contribution Method (ECM), where you contribute the FBT-equivalent amount post-tax. EVs skip this step entirely, so the savings are bigger.

The exemption was extended for plug-in hybrids until 1 April 2025. After that, only fully electric BEVs qualify for the exemption.

Most novated leases bundle these running costs into the pre-tax payment:

• Fuel or charging: typically a fuel card or reimbursement
• Registration & CTP
• Comprehensive insurance
• Servicing & maintenance (scheduled and ad hoc)
• Tyres (replacement when worn)
• Roadside assistance

This is one of the most attractive features — instead of paying these expenses with after-tax dollars, you pay with pre-tax salary, multiplying your savings.

Mileage assumptions matter: under-estimating annual kms means your bundle runs short and you'll get balance-true-up charges. Over-estimating means money sitting in the lease escrow that's refunded at end of term (often without interest).

You have three options at the end of the lease term:

1. Pay out the residual and own the car. The residual is set by the ATO based on term — typically 28% of the GST-exclusive price for a 5-year lease, 47% for 3 years.
2. Refinance the residual as a new novated lease (often the same car, often with a new term, sometimes called "re-novating").
3. Trade in or sell the car and use proceeds to pay the residual. If the market value exceeds the residual, you pocket the difference.

For EVs, residuals can be tricky — the used EV market is still maturing, and some models depreciate faster than expected. Conservative buyers often go with shorter (3-year) terms to ride out the early depreciation curve.

You need three things:

• An employer who offers novated leasing — most large employers do, and many SMEs can set it up via providers like Smartleasing, Maxxia, RemServ, or Vehicle Solutions Australia. Public servants almost always have access.
• A salary high enough to benefit — generally you need to be earning over $45,000 to get meaningful tax savings (above the second tax bracket).
• Stable employment — leases are typically 1–5 years, and if you change jobs, you have to either novate to your new employer (if they offer it), pay out the residual, or convert to a personal lease (worse terms).

If you change jobs to one that doesn't offer salary packaging, the lease becomes your personal liability under what's called a "non-novated" or "associate" lease — and you lose the tax benefits.

It depends on your situation. Novated leasing is usually better when:

• You're on a high marginal tax rate (37%+)
• You're buying a new car you'd buy anyway
• You're getting an EV (the FBT exemption tips it heavily in favour)
• You drive enough to make the bundled running costs worthwhile (typically 10,000+ km/year)
• You have stable employment for the lease term

Buying outright is usually better when:

• You're on a lower marginal tax rate (30% or less)
• You can buy used or older — most novated lease providers won't lease cars older than 12 years at end-of-term
• You drive very few kms (under 8,000/year)
• Your employment is uncertain

Run the numbers in this calculator with realistic inputs, then get a quote from a provider. Compare the lease's total cost of ownership against simply buying the car with cash or a personal loan.

Yes, novated leases come with fees that aren't always upfront. Common ones:

• Establishment fee: $300–$1,500 to set up the lease
• Monthly admin fee: $20–$50/month for managing the bundle
• Interest rate margin: novated rates are typically 2–4% above the cash rate, often higher than personal loan rates from banks
• End-of-lease fees: for residual processing, dispute resolution, etc.
• Insurance premium markups: some bundlers use specific insurers with margin built in — compare against your own quotes

Always ask for the full disclosure schedule showing all fees before signing. Compare quotes from at least 2–3 providers — they vary significantly.