Novated Lease Calculator

How novated leasing works

A novated lease is a three-way agreement between you, your employer, and a lease company. Your employer deducts the lease payments from your pre-tax salary and pays the lease company directly. The deduction covers both the finance repayments and agreed running costs: registration, insurance, fuel or charging, tyres, and servicing.

Because the deduction comes from pre-tax income, you effectively pay for the car at your marginal tax rate. At a 30% marginal rate (32% including the Medicare Levy), $10,000 paid from pre-tax salary only reduces your take-home pay by about $6,800 (the remaining $3,200 is tax you would have paid anyway).

For battery electric cars, the FBT exemption means there is no FBT liability at all, so the whole lease can come out of pre-tax salary. The exemption applies to cars first held and used from 1 July 2022 with a value under the luxury car tax threshold for fuel-efficient cars ($91,661 in 2026/27). Plug-in hybrids no longer qualify for new arrangements from 1 April 2025. The full exemption runs to 31 March 2027, and the 2026 Budget announced it will be wound back from 1 April 2027, with existing arrangements protected. Consult your lease provider for current eligibility.

For all other cars, FBT applies at 20% of the car’s price each year. Most novated leases cover it with an after-tax contribution, so only part of the lease is paid from pre-tax salary and the tax saving is smaller.

Plug-in hybrids and FBT

From 1 April 2025, a plug-in hybrid no longer qualifies for the electric car FBT exemption unless it was already covered by a binding commitment. To keep the exemption, the car had to be used or available for private use before 1 April 2025, and there had to be a financially binding commitment to keep providing it after that date. The ATO has no discretion to extend this date, so delivery delays do not help.

A new PHEV lease is treated like an ordinary car for FBT. Changing an existing arrangement can also end the exemption, for example extending the lease, changing employer, or changing the lease payments or residual value. Source: ATO – FBT on plug-in hybrid electric vehicles.

Novated leases in the ACT

The tax treatment of a novated lease is federal, so it is the same in the ACT as anywhere else. What differs by state is running costs such as registration and compulsory third-party insurance. Enter your own running costs in the calculator, because these vary by state and by car.

Note: Real savings depend on the specific lease structure, the car’s value, your income, and your employer’s administration fees. This calculator shows the income tax saving only.