Car salary sacrifice — updated for 2026–2027
Novated Lease Calculator — Car Salary Sacrifice & EV Tax Savings
Work out whether a novated lease beats a car loan or paying cash for your salary and car. The verdict-first result shows the saving, the fortnightly take-home impact, and how the EV FBT exemption and current PHEV rules change it.
Novated lease inputs
Your salary
The car
Vehicle type
FBT exempt — under the $91,661 threshold
The lease
Novated Lease Estimate
A novated lease saves you
$18,115
vs a car loan over 3 years
- Take-home drop /fortnight
- $477
- Effective weekly cost
- $413
- Vs buying outright
- $16,686
- Tax saved over term
- $17,499
- GST saved
- $6,867
- FBT-exempt — all lease and running costs come out of pre-tax salary.
- $27,190 residual is due at the end of the term — pay it out, refinance, or trade the car in.
Lease vs loan vs cash (3-year total)
| Item | Novated lease | Car loan | Cash (offset) |
|---|---|---|---|
| Weekly cost | $413 | $529 | $520 |
| Total cost | $64,376 | $82,491 | $81,062 |
| Residual to pay | $27,190 | — | — |
How this estimate is calculated
- Your marginal tax rate30%
- Amount financed$52,727
- GST saved on the vehicle$5,273
- Residual rate (3yr term)46.88%
- Annual lease payment$12,913
- Annual running costs in package$5,315
- Deducted from pre-tax salary each year$18,228
A novated lease allows you to pay for your car and running costs from your pre-tax salary.
Calculations run in your browser — your salary and car details are never sent to a server.
How a novated lease works
A novated lease is a three-way agreement between you, your employer and a financier. Your employer takes the lease payment and a budget for running costs out of your salary before tax and pays them to the financier, so the car and its fuel, charging, insurance, servicing and registration all come out of pre-tax dollars. You drive the car as your own; the salary deduction is the mechanism.
At the end of the term the lease has a residual — a final balloon value set by the ATO minimum for the term — that you pay out (plus GST), refinance, or clear by trading the car in. Leave your job and the lease travels with you: novate it to a new employer, keep it as an ordinary finance lease, or pay it out.
Whether a lease actually beats a car loan or cash comes down to the FBT rules. An exempt EV runs entirely pre-tax; a non-exempt car carries FBT that has to be managed, which is why the same car price can produce very different outcomes.
The EV FBT exemption
The exemption is the reason an electric-car novated lease stacks up. Under the ATO's electric cars exemption, a car qualifies when it is:
- a battery-electric or hydrogen fuel-cell car (not a plug-in hybrid);
- first held and used on or after 1 July 2022; and
- priced below the fuel-efficient luxury car tax threshold — $91,661 for the 2026–2027 FBT year.
Plug-in hybrids lost eligibility
PHEVs stopped qualifying for the exemption from 1 April 2025. An arrangement is only grandfathered where there was a financially binding commitment before that date and the car's private use continues uninterrupted. A new PHEV lease is treated as a standard FBT car.
One catch: an exempt EV benefit is still a reportable fringe benefit. The grossed-up value appears on your income statement and feeds the income tests for the Medicare levy surcharge, your HECS/HELP repayment income, Division 293 super tax and family payments. The lease cuts the tax on your pay yet can lift those thresholds — worth checking alongside your other salary packaging.
ECM vs full pre-tax
For a non-exempt car — petrol, diesel or an ineligible EV — the ATO values the private use benefit using the statutory formula: the statutory 20% rate applied to the car's base value each FBT year. Left unmanaged, that taxable value would attract FBT and wipe out the saving.
The Employee Contribution Method (ECM) fixes that: you pay part of the running costs from post-tax income, and every post-tax dollar reduces the FBT taxable value dollar-for-dollar. Contribute enough and the taxable value — and the FBT — falls to zero, but those post-tax dollars are the price of the arrangement.
An exempt EV skips all of this: with no FBT liability there is nothing to offset, so the entire lease and running-cost budget stays pre-tax. That structural difference — full pre-tax versus part post-tax — is why the same car price produces very different take-home outcomes for an EV and a petrol car.
Two ways a novated lease saves you money
Figures computed from the 2026–2027 thresholds and marginal rates. These illustrate the mechanics — use the calculator above for a full lease comparison.
GST you never pay on an EV
On a $58,000 electric car, the financier claims the GST input tax credit, so you finance the ex-GST amount. The credit is capped at the GST on the threshold ($91,661 ÷ 11 = $8,333).
Pre-tax deductions at your marginal rate
$12,000of lease and running costs taken pre-tax saves the tax you'd have paid on it — more the higher your marginal rate (plus the 2% Medicare levy).
Example inputs only. Your actual saving depends on the car, your salary, running costs and your provider's fees and margin.
Residual value and the end of the lease
Every novated lease ends with a residual value — a final balloon amount set no lower than the ATO minimum percentage for the term. Shorter terms carry a higher residual (less of the car has been paid off); longer terms lower it. The calculator applies the minimum residual for the term you choose.
When the term ends you settle the residual (plus GST) in one of three ways: pay it out and own the car, refinance it into a new lease term, or trade the car in and put the proceeds toward the balloon. Budget for the residual up front — it is a real cost, not an optional extra, and it is what a headline "weekly cost" leaves out.
Novated Lease FAQs
What is a novated lease?
A novated lease is a three-way agreement between you, your employer, and a finance company that lets you pay for a car and its running costs (finance, fuel or charging, insurance, servicing, registration) from your pre-tax salary. Your employer deducts the payments before tax and remits them to the financier, lowering your taxable income while you use the car as your own.
How do you calculate a novated lease?
Start from your annual salary, the car's driveaway price, the lease term and your annual kilometres. From those inputs the calculator works out the amount financed (ex-GST for an eligible car, capped at the luxury car tax limit), spreads the lease payments and running costs across your pays, applies the FBT treatment for your vehicle type, and takes eligible costs out pre-tax to find the tax saved at your marginal rate. It then compares the total cost of the lease against a car loan and paying cash, including the residual due at the end of the term. Recreate any provider quote in the calculator above to check its numbers.
What is the EV FBT exemption?
Since 1 July 2022, eligible zero- and low-emission cars first held and used on or after that date are exempt from Fringe Benefits Tax if their value is below the fuel-efficient luxury car tax threshold — $91,661 for the 2026–2027 FBT year. That exemption is what lets an EV novated lease run entirely on pre-tax dollars, making it markedly cheaper than a petrol car on the same terms.
How much can I save with a novated lease?
Savings scale with your marginal rate and the car's FBT treatment. As a guide, $12,000 a year of lease and running costs taken pre-tax saves about $3,840 a year at the middle marginal rate and $5,640 at the top rate, each including the Medicare levy — and on an FBT-exempt EV the financier's GST credit also cuts the financed price by up to $8,333. A non-exempt petrol or diesel car keeps less of this, because post-tax employee contributions are needed to offset the FBT. Enter your own salary, car price and running costs in the calculator above for your specific verdict.
Can I salary package any car?
Almost any new or used car can be novated when your employer offers the benefit. But the FBT exemption only applies to eligible battery-electric and hydrogen fuel-cell cars priced below the fuel-efficient luxury car tax threshold ($91,661). A petrol, diesel or otherwise ineligible car is still leaseable, but it carries FBT, which is managed with post-tax employee contributions rather than exempted.
Can I novate a used car?
Yes. Most providers allow used cars, though the vehicle usually has to be under a certain age at the end of the lease term. The EV FBT exemption also applies to an eligible used electric car, provided it was first held and used on or after 1 July 2022 and was under the threshold when first purchased. Residual values and lease terms for used cars can differ from new.
Can I novate a Tesla?
Yes. Battery-electric models like the Tesla Model 3 and Model Y are among the most-packaged novated lease cars because they qualify for the EV FBT exemption when priced below $91,661. Running the whole lease pre-tax is what drives the saving over a car loan; use the calculator above to size it against your salary and lease term.
Does the FBT exemption apply to plug-in hybrids (PHEVs)?
Not any more. Plug-in hybrid electric vehicles stopped being eligible for the EV FBT exemption from 1 April 2025. The only exception is where there was a financially binding commitment to provide the PHEV before that date and its private use continues uninterrupted — those arrangements can keep the exemption under transitional rules. A new PHEV lease taken out now is treated as a standard FBT car, not an exempt EV.
What happens to my novated lease if I leave my job?
The lease doesn't end when you leave — it stays with you. You can novate it to a new employer that offers the benefit, keep it as a standard finance lease and pay from your after-tax income, or pay it out early. The main change is that you lose the pre-tax salary deduction until a new employer picks the lease up.
How does the EV exemption affect Medicare levy surcharge and HECS?
An exempt EV benefit is still a reportable fringe benefit. The grossed-up value goes on your income statement and feeds the income tests for the Medicare levy surcharge, HECS/HELP repayment income, Division 293 super tax, and family assistance. So the lease can lower your take-home tax yet nudge those thresholds up. Check the effect with the HECS calculator and factor it into any surcharge planning.
Is a novated lease actually worth it?
It depends on the car and your income. The strongest case is an FBT-exempt EV under the threshold packaged by a higher-rate taxpayer — the whole lease runs pre-tax, so the tax saved is large. The marginal case is a lower income or a non-exempt petrol car: your marginal rate is smaller, and the employee contributions needed to cancel the FBT eat into the benefit. Model both scenarios in the calculator before deciding.
Is a novated lease worth it on a $100k salary?
Around a six-figure salary you sit in a middle-to-upper marginal bracket, so pre-tax deductions are saved at a meaningful rate plus the Medicare levy — enough for an exempt EV lease to beat a car loan in most cases. A non-exempt car is closer to break-even because the FBT charge offsets much of the tax saved. Enter $100,000 and your target car in the calculator above to see the actual weekly and total figures.
How does a novated lease affect my take-home pay?
Your employer deducts the lease and running-cost budget from each pay before tax, so your take-home pay drops by the deduction less the tax you no longer pay on it. For an exempt EV the after-tax cost of that drop is smaller than the sticker cost, because none of it is taxed. The calculator shows the fortnightly take-home reduction alongside the tax saving so you can see the net effect on each pay.
What are the negatives of a novated lease?
A novated lease commits you to a term with a residual to settle at the end, and paying it out early or on a job change can be costly. Provider fees and the finance margin baked into the lease rate reduce the saving, and quoted running-cost budgets are estimates that may not match your real spend. The reportable benefit can also lift income-tested thresholds. Weigh these against the tax saving rather than the headline discount.
What is the 1.5 rule when leasing a car?
The 1.5 rule is an informal rule of thumb from ordinary consumer leasing — not an ATO rule — that a lease is reasonable value when the monthly payment is no more than 1.5 per cent of the car's list price. It ignores everything that makes a novated lease different: pre-tax deductions, the GST saving on the purchase price, the FBT treatment, and the residual you settle at the end of the term. Two novated quotes can pass or fail the 1.5 rule and still rank the opposite way once tax is counted, so treat it as a first-pass sanity check on a quote, then compare the full pre-tax picture in the calculator above.
Is a novated lease worth it on a lower salary?
Less so. The tax saving is proportional to your marginal rate, so on a lower income — where that rate is already low — the benefit is modest, and on a non-exempt car the employee contributions needed to offset the FBT can erode it further. An exempt EV still helps because it removes FBT entirely, but run your own salary and car through the calculator before committing.
Estimates, not advice
Provider quotes bundle fees, insurance margins and a finance rate that vary between companies, so a real quote will differ from any estimate here. FBT treatment and eligibility depend on your employer's arrangement and the specific car — confirm both with your employer's salary-packaging provider before committing.
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