How to use this calculator
The results update as you type.
- Annual salary before tax: your gross salary, not including super.
- Car price: the drive-away price, including GST.
- Lease term: 1 to 5 years. Longer terms have lower payments and a smaller residual.
- Lease interest rate: the rate in your lease quote.
- Running costs per year: fuel or charging, insurance, servicing, tyres and registration, including GST.
- Electric car: tick this for a battery electric or hydrogen fuel cell car. Plug-in hybrids don’t qualify for the exemption.
The results show how much less you’d take home each month and year, the pre-tax and post-tax deductions, the residual, and the total cost of leasing against buying outright.
Example: a $55,000 car over 3 years
Say you earn $90,000, and the car costs $55,000 drive-away. The lease runs for 3 years at 8%, and running costs are $4,000 a year.
Your employer claims the $5,000 GST on the car, so the lease finances $50,000. The ATO minimum residual for 3 years is 46.88%, or $23,440, and the lease payment is $988.56 a month.
| Petrol car | Eligible EV | |
|---|---|---|
| Pre-tax deduction per year | $5,499.09 | $15,499.09 |
| Post-tax deduction per year | $11,000.00 | $0 |
| Less take-home pay per month | $1,228.28 | $878.28 |
| Total cost over 3 years (with residual) | $70,002.14 | $57,402.14 |
| Buying outright (car + running costs) | $67,000.00 | $67,000.00 |
| Difference | $3,002.14 more | $9,597.86 less |
The petrol car needs an $11,000 post-tax contribution each year to remove fringe benefits tax, which cancels out most of the tax saving. The EV is FBT-exempt, so everything comes from pre-tax pay. Over a 5-year term, the same EV would save $13,610.99 compared with buying outright.
How it’s calculated
- GST credit: your employer claims the GST on the car, up to one-eleventh of the $69,883 car limit, and on running costs. The lease finances the price without that GST.
- Residual = ATO minimum percentage for the term × financed amount (65.63% for 1 year, 56.25% for 2, 46.88% for 3, 37.5% for 4, 28.13% for 5). You pay it at the end, plus GST.
- Lease payment: monthly, in arrears, so that the payments and the residual repay the financed amount at your interest rate.
- Deductions: for an eligible EV, the lease payments and running costs (without GST) all come from pre-tax salary. For other cars, a post-tax contribution of 20% of the car price each year removes fringe benefits tax, and the rest is pre-tax.
- Take-home pay uses the 2026–27 resident tax rates, the low income tax offset and the 2% Medicare levy.
Total lease cost = reduction in take-home pay × years + residual with GST. Buying outright = car price + running costs × years.
The calculator doesn’t include provider fees, the Medicare levy surcharge, HELP repayments or the car’s value at the end. The low-income Medicare levy thresholds are the latest published by the ATO, for 2025–26.
Tips before signing a novated lease
- Compare quotes from more than one provider. Interest rates, fees and running cost budgets vary.
- Check what’s in the running costs. Some packages bundle insurance, servicing and tyres; make sure the budget is realistic.
- Plan for the residual. You’ll need to pay, refinance or sell the car at the end of the lease.
- Ask what happens if you change jobs. The lease usually moves back to you if you leave, so check the terms.
- Look at the total cost, not just the tax saving. As the example shows, a lease can cost more than buying even with a tax benefit.
Frequently asked questions
What is a novated lease?
A car lease that your employer pays from your salary on your behalf, under an agreement between you, your employer and a finance company. Part of the cost comes out of your pre-tax salary, which lowers your income tax.
Are electric cars exempt from fringe benefits tax?
Battery electric and hydrogen fuel cell cars priced at or below the luxury car tax threshold for fuel-efficient vehicles ($91,661 in 2026–27) are currently exempt, so the whole package can come from your pre-tax salary. The exempt amount still appears on your income statement as a reportable fringe benefit.
What changes for EVs from 1 April 2027?
The 2026–27 Budget announced that from 1 April 2027, EVs costing $75,000 or less keep a 100% FBT discount, while EVs above that but below the luxury car tax threshold get a 25% discount, until 1 April 2029. The ATO says existing leases won't be affected.
What is the employee contribution method?
For cars that aren't FBT-exempt, you pay part of the cost from your after-tax pay. If those post-tax contributions equal the car's FBT taxable value (20% of the car's cost each year under the statutory formula), no fringe benefits tax is payable.
What happens at the end of the lease?
You owe the residual (balloon) payment, set at least at the ATO minimum for the lease term. You can usually pay it and keep the car, refinance it, or sell or trade the car to cover it.
Is a novated lease worth it for a petrol car?
It depends on your salary, the car and the lease rate. In our example, a $55,000 petrol car costs about $3,000 more over 3 years than buying outright, while the same car as an eligible EV saves about $9,600. Enter your own figures to compare.