Novated Lease Calculator Australia (2026–27)
Calculate your novated lease salary packaging tax savings under current ATO rules. Model Electric Vehicle (EV) zero-FBT exemptions under $91,387, Employee Contribution Method (ECM) post-tax offsets, and 10% GST discounts.
Fuel/charging, comprehensive insurance, servicing, tires, & registration.
Estimated Annual Tax & GST Savings
$6,204
Combined income tax, Medicare, & GST savings per year.
Upfront GST Saved on Purchase
$5,909
10% GST discount on car price (up to ATO max $6,191 cap).
Net Annual Out-of-Pocket Cost
$11,905
Real annual cost including all vehicle payments & running costs.
Novated Lease Financial & Tax Breakdown
1. The Australian Novated Lease Framework (2026–27)
A Novated Lease is an ATO-approved salary packaging arrangement governed by the Fringe Benefits Tax Assessment Act 1986.
By financing a vehicle and bundling all running costs into pre-tax payroll deductions, employees reduce taxable income while avoiding GST on vehicle acquisition and maintenance.
2. EV vs Petrol Novated Lease Savings Benchmarks
| Vehicle Purchase Price | Fuel & FBT Status | Annual Tax Saved | Annual GST Saved | Net 3-Yr Term Savings |
|---|---|---|---|---|
| $55,000 Electric Vehicle (EV) | 100% Battery EV (0% FBT) | $5,200 Tax Saved / yr (39% Rate) | $650 GST Saved / yr | $17,550 Net Savings |
| $75,000 Electric Vehicle (EV) | 100% Battery EV (0% FBT) | $7,800 Tax Saved / yr (47% Rate) | $750 GST Saved / yr | $25,650 Net Savings |
| $50,000 Petrol SUV (ICE) | Petrol Engine (20% Statutory FBT) | $2,800 Tax Saved / yr (ECM Offset) | $550 GST Saved / yr | $10,050 Net Savings |
| $85,000 Hybrid Sedan (ICE) | Hybrid Engine (20% Statutory FBT) | $3,900 Tax Saved / yr (ECM Offset) | $680 GST Saved / yr | $13,740 Net Savings |
3. The Mathematics of EV FBT Exemptions & ECM Offsets
Net Annual Tax Savings (Savings_net) for EV pre-tax lease payment (Lease_ev), running costs (Run_costs), marginal tax rate (r_marginal %), and GST savings (GST_saved) is:
Example Novated Lease Calculation ($60,000 EV @ 39% Tax Rate):
- Annual EV Lease + Running Costs: $13,500 total packaged pre-tax.
- Income Tax Saved (39% rate): $13,500 × 39% = $5,265 tax saved / year.
- GST Savings on Running Costs: $650 GST saved / year.
- Total Net Benefit = $5,915 net cash savings per year ($17,745 over 3-yr term).
4. Step-by-Step Guide to Novated Lease Packaging
Select Vehicle & Verify FBT Exemption Eligibility
Select vehicle model; verify battery electric vehicle (BEV) status under $91,387 LCT threshold.
Estimate Annual Kilometers & All-Inclusive Running Costs
Estimate annual fuel/charging, comprehensive insurance, servicing, registration, and tires.
Calculate Pre-Tax & Post-Tax Salary Deduction Split
Apply 100% pre-tax deductions for eligible EVs or ECM pre/post-tax split for petrol/hybrid cars.
Subtract GST Savings (10% Credit Benefit)
Deduct 10% GST savings on car purchase price and all packaged vehicle operating expenses.
Compare Novated Lease vs Out-of-Pocket Cash Purchase
Compare total 3–5 year post-tax cost against financing or paying cash for the vehicle out-of-pocket.
5. Novated Lease Mistakes & Checklist
Exceeding the $91,387 LCT Threshold on Electric Vehicles
Buying a premium EV priced at $92,000, forfeiting 100% of the EV FBT exemption and triggering full FBT.
Forgetting Reportable Fringe Benefits (RFBA) HECS Impact
Packaging an EV without realizing reportable fringe benefits increase HECS repayment income thresholds.
Failing to Utilize ECM Post-Tax Contributions on Petrol Vehicles
Deducting 100% pre-tax for non-EV cars without ECM post-tax split, incurring 47% FBT tax bills.
Underestimating Annual Driving Kilometers
Setting lease estimates at 10,000 km/yr when driving 25,000 km/yr, creating year-end out-of-pocket fuel shortfalls.
Novated Lease Compliance Checklist
Luxury Car Tax (LCT) $91,387 Cap Audit
Ensure EV vehicle GST-inclusive purchase price is below $91,387 to qualify for 0% FBT exemption.
Employer Salary Packaging Policy Clearance
Confirm your employer’s HR/payroll department permits novated leasing salary packaging.
ECM 20% Statutory Formula FBT Reconciliation
Ensure post-tax employee contribution equals 20% of car base value for non-EV petrol vehicles.
Reportable Fringe Benefits (RFBA) Income Check
Audit grossed-up RFBA value added to myGov Income Statements for HECS/Medicare surcharge math.
6. Novated Lease Life-Cycle Timeline
Novation Agreement & Employer Payroll Setup
Execute 3-way novation agreement; payroll configures pre-tax and post-tax salary deductions.
Automated Pre-Tax Salary Deductions
Pre-tax lease repayments deducted before PAYG income tax; fuel cards funded automatically.
Odometer Declaration & FBT Reconciliation
Submit odometer reading; leasing company reconciles running cost budgets and ECM contributions.
Residual Value (Balloon) Settlement Option
Pay residual value to own car, refinance residual balance, or trade in for new novated lease EV.
Disclaimer: This Novated Lease calculator and guide are provided for general educational and informational planning purposes only. EV zero-FBT exemption thresholds ($91,387 LCT cap), ECM statutory formulas (20%), and GST credit rules reflect 2026–27 Australian Taxation Office guidelines. This page does not constitute formal financial, automotive, or tax advice.
Charlotte Smith
Senior Personal Finance & Taxation Specialist at AussieSpot
Charlotte Smith is the lead personal finance advisor and workplace specialist at AussieSpot. Charlotte has over 12 years of experience helping Australian households build budgets, plan savings goals, and manage living costs.
Frequently Asked Questions (FAQ)
What is a Novated Lease and how does it create tax savings?
A Novated Lease is a three-way salary packaging agreement between you, your employer, and a leasing company. Vehicle lease payments and running costs (fuel/charging, servicing, insurance, tires) are paid from your pre-tax salary, reducing your taxable income.
How does the Electric Vehicle (EV) FBT Exemption work for novated leases?
Under Australian tax law, eligible Zero and Low Emission Vehicles (BEVs and PHEVs) valued under the Luxury Car Tax fuel-efficient threshold ($91,387 for 2026–27) are 100% EXEMPT from Fringe Benefits Tax (FBT), maximizing tax savings.
What is the Employee Contribution Method (ECM) for petrol/diesel cars?
For internal combustion engine (ICE) vehicles subject to FBT, ECM allows you to pay a portion of running costs from post-tax salary to offset the FBT statutory formula value (20%) down to $0, avoiding 47% FBT tax liabilities.
Do I save 10% GST on car purchase price and vehicle running costs?
Yes! Your employer claims GST input tax credits on the vehicle purchase price (up to $6,195 GST cap) and 100% of GST on running costs (fuel, servicing, insurance), passing those 10% savings directly to you.
What happens to the novated lease if I change employers?
A novated lease is fully portable. If you change jobs, you can transfer the novation agreement to your new employer’s payroll, or continue making lease repayments directly from post-tax income.