Novated Lease Calculator

A novated lease is a three-way arrangement between you, your employer and a finance company: the lease payments and running costs for your car are deducted from your pre-tax salary, reducing your taxable income. This calculator estimates the full package — lease payment, running costs, and the income-tax saving at your marginal rate — and reports what the car really costs you per year, month and fortnight. It also checks whether an electric vehicle qualifies for the fringe benefits tax (FBT) exemption.

How It Works

1. Residual value. The vehicle price is multiplied by your residual percentage — the balloon payment due at the end of the lease. The tool stores the ATO's statutory minimum residual guidelines: 65.63% after 1 year, 56.25% after 2, 46.88% after 3, 37.5% after 4 and 28.13% after 5.
2. Lease payment. The monthly payment amortizes the full vehicle price with the residual treated as a discounted future amount: the payment covers interest plus the portion of the price above the residual's present value.
3. Package cost. The annual lease payment plus your annual running costs (fuel or charging, insurance, registration, servicing, tyres) is the total salary-packaged amount, also shown per month and per fortnight (annual ÷ 26).
4. Tax saving. Your marginal tax rate is read from the Australian resident scale stored in the tool, including the 2% Medicare levy: 18% between $18,201 and$45,000, 32% to $135,000, 39$190,000 and 47% above. The estimated saving is the package cost times that rate; the net cost is the package minus the saving.
5. FBT status. If the vehicle is an EV or plug-in hybrid priced at or below the $91,387 luxury car tax threshold for fuel-efficient vehicles, the tool flags the full FBT exemption; above the threshold, or for combustion vehicles, it reports the standard position where FBT is typically managed through the Employee Contribution Method.

The Formulas

$\text{Monthly Payment} = \frac{\left(P - \dfrac{R}{(1 + r)^{n}}\right) \times r}{1 - (1 + r)^{-n}}$

$\text{Estimated Tax Saving} = (\text{Annual Lease} + \text{Running Costs}) \times \text{Marginal Tax Rate}$

where $P$ is the vehicle price, $R$ the residual value, $r$ the monthly interest rate and $n$ the term in months.

Input Parameters

| Parameter | Unit | Description | |---|---|---| | Vehicle Price | Currency (AUD) | Drive-away price of the vehicle. | | Residual % | % | Balloon due at lease end; compare against the ATO minimums above. | | Interest Rate | % per year | The finance rate quoted by the leasing provider. | | Term | Years | Lease length, typically 1 to 5 years. | | Annual Running Costs | Currency | Fuel/charging, insurance, registration, maintenance and tyres per year. | | Annual Salary | Currency (AUD) | Gross salary, used to find your marginal tax rate. | | Fuel Type | Choice | EV, PHEV, hybrid, petrol or diesel — drives the FBT exemption check. |

Worked Example

A $60,000 petrol SUV on a 3-year lease at 7$6,500 a year in running costs, and a salary of $120,000 (a 32% marginal rate including Medicare).

• Residual value: $60,000 × 46.88$28,128.00**; the amount amortized above the residual is $31,872.00.
• Monthly lease payment: $1,148.19** — an annual lease cost of **$13,778.34.
• Annual package cost: $13,778.34 +$6,500 = **$20,278.34** ($1,689.86 a month, $779.94 a fortnight).
• Estimated tax saving: $20,278.34 × 32$6,489.07**.
• Net annual cost: **$13,789.27** —$1,149.11 a month, or $530.36 a fortnight out of your pocket after the tax benefit.

Because the car is a petrol vehicle, the FBT status reports the standard position rather than the EV exemption.

Interpreting the Results

• The tax saving scales with your bracket. The same $20,278 package saves$3,650 at the 18% rate, $6,489 at 32$7,909 at 39% and $9,531 at 47%. Novated leasing is worth most to higher earners — and worth least, sometimes negatively after provider fees, on lower incomes.
• The residual is not a saving. The $28,128 balloon is still owed at the end — you pay it, refinance it, or hand the car back against it. The lease payments only ever covered the rest of the price plus interest.
• Compare net cost against buying outright. The fair comparison is this tool's net annual cost against financing the same car personally and paying running costs from after-tax income.

The EV Exemption

Eligible EVs and plug-in hybrids below the $91,387 threshold can have 100% of lease and running costs packaged pre-tax with no FBT — the most generous corner of novated leasing, and the case where the calculator's tax-saving estimate is at its most reliable. Note that from April 2025, plug-in hybrids lost eligibility for the exemption under the law's sunset; the tool flags EV/PHEV status by price and fuel type, so confirm your specific vehicle's eligibility with your provider before relying on the exemption.

Limitations

• FBT is flagged, not calculated. For non-exempt vehicles the model applies your full marginal rate to the whole package; real outcomes depend on the Employee Contribution Method split between pre- and post-tax contributions, which reduces the effective saving.
• Simplified tax modeling. HECS/HELP repayments, tax offsets, salary changes mid-year and the effect of packaging on other income-tested benefits are not modeled, and the marginal rate is applied flat to the package rather than testing whether the package itself drops you into a lower bracket.
• No provider fees or GST treatment. Leasing company management fees are excluded, and the model takes the vehicle price as given rather than stripping GST the way a financier's quote does.

Frequently Asked Questions

Why is there a minimum residual?

The ATO requires novated lease residuals to reflect the car's expected market value at lease end, so the arrangement is a genuine lease rather than a disguised purchase. The percentages stored in this tool — from 65.63% for one year down to 28.13% for five — are those statutory guidelines.

What happens when the lease ends?

You can pay the residual and keep the car, sell or trade the car (settling the residual from the proceeds and pocketing or covering any difference), or refinance the residual into a new lease or loan.

Does a novated lease always save money?

No. The benefit is your marginal tax rate applied to the package; against it sit the provider's finance margin, fees, and possibly a higher effective interest rate than a personal loan. On lower incomes or short terms the package can cost more than buying outright — which is why comparing the net cost matters.