Novated lease calculator: estimate your tax savings

How to Use the Novated Lease Calculator

Our novated lease calculator is designed to give you a clear picture of the potential tax savings available through salary packaging your vehicle. Here is how to get the most accurate estimate from the calculator and what each result means for your finances.

Step 1: Enter Your Annual Salary

Enter your gross annual salary before tax. This is your total package or base salary as shown on your employment contract. The calculator uses this to determine your marginal tax rate, which directly affects how much you save through pre-tax salary deductions. The higher your income and marginal tax rate, the greater the income tax savings from a novated lease.

Step 2: Enter the Vehicle Price

Enter the drive-away price of the vehicle you are considering. This should include the purchase price, stamp duty, dealer delivery charges, and any on-road costs. For used vehicles, enter the total purchase price including any dealer fees. The vehicle price determines the finance component of your novated lease and the GST saving on the purchase.

Step 3: Select Your Fuel Type

Choose between petrol, diesel, electric (BEV), or plug-in hybrid. This selection has two effects on the calculation: it adjusts the default running costs to reflect the fuel type (electric vehicles have significantly lower fuel and maintenance costs), and for battery-electric cars priced at or below the threshold ($91,661 for 2026-27) it applies the FBT exemption, which dramatically increases your savings. Plug-in hybrids lost the exemption from 1 April 2025, so FBT is applied to them.

Step 4: Review Running Costs

The calculator pre-fills an estimated annual running cost based on your selected fuel type. This includes fuel or electricity charging, comprehensive insurance, registration and CTP, scheduled servicing, tyre replacement, and roadside assistance. You can adjust this figure up or down based on your expected driving habits and vehicle requirements. All running costs are packaged with the lease under a fully maintained novated lease.

Step 5: Choose Your Lease Term

Select a lease term from 1 to 5 years. The lease term affects the residual value (balloon payment at the end of the lease), the annual finance cost, and the overall savings. Longer lease terms generally result in lower annual deductions but a lower residual value. The most common lease term is 4 or 5 years, which balances manageable fortnightly costs with reasonable residual values.

Understanding Your Calculator Results

Pre-Tax Salary Deduction

This is the total amount deducted from your gross salary each year before tax is calculated. It covers the lease finance and the budgeted running costs, both excluding GST. For a car with FBT, the after-tax contribution pays for part of the package, so the pre-tax deduction is that much smaller. This deduction reduces your taxable income, which is where the income tax savings come from.

Income Tax Saving

This is the difference in income tax you pay as a result of the pre-tax salary deduction. Because the novated lease payments reduce your taxable income, you move into a lower effective tax rate. The saving is calculated by comparing your income tax with and without the novated lease deduction, using the ATO's 2026-27 resident tax brackets and the 2% Medicare levy.

GST Saving

Under a novated lease, the finance company claims back the GST on the car's price, so the lease is set on the price without GST, and your employer claims back the GST on the lease payments and running costs. The residual is also set on the price without GST, but GST is added when you pay it, so the saving on the car is the GST on the finance payments rather than on the whole price. Above the car limit ($69,883 for 2026-27) the finance company can claim back at most $6,353 of GST on the car. On the calculator's starting example, a $50,000 car with $6,000 a year of running costs over 5 years, that comes to about $1,388 a year. For a car with FBT, your employer pays GST of one eleventh on your after-tax contribution, which takes back $909 of that for the petrol car in the example.

FBT Impact

For conventional petrol and diesel vehicles, Fringe Benefits Tax applies to the private use of the salary-packaged vehicle. This is typically managed through the employee contribution method: you pay the car's taxable value (20% of its base value a year) from after-tax pay, which brings the FBT to nil. That contribution pays for part of the lease and running costs instead of your pre-tax salary, so the part of the package it covers earns no income tax saving. On the starting example, a $10,000 contribution leaves a pre-tax deduction of $4,790 and an estimated saving of $2,012 a year. If the package costs less than the taxable value, the contribution cannot cover it all and the calculator shows the FBT left over. For eligible electric vehicles, the FBT is shown as “Exempt”, so no contribution is needed and the whole package comes out of pre-tax pay.

Fortnightly Cost Comparison

The fortnightly comparison shows the cost difference between a novated lease and buying a car with after-tax income, in pre-tax terms. The “buying outright” figure represents the pre-tax equivalent of what you would need to earn to cover the same vehicle and running costs from after-tax dollars. The novated lease figure is the pre-tax deduction from your salary each fortnight, plus any after-tax contribution converted to its pre-tax equivalent the same way. Because both figures are before tax, the fortnightly saving is larger than the annual saving divided by 26.

Novated Lease Savings by Income Level

Your income affects the saving because the income tax benefit depends on your marginal tax rate. The table shows what this calculator estimates for an eligible battery-electric car priced at $50,000, at different salaries.

Illustrative figures from this calculator, not a quote: an FBT-exempt battery-electric car at $50,000, a 5-year lease at an indicative 6.5% p.a. with the ATO's 28.13% residual, $3,000 a year of running costs (the calculator's default for an EV) and the 2026-27 resident tax rates plus the 2% Medicare levy. The saving compares the lease with paying the same finance and running costs from after-tax pay, and leaves out provider fees. For a petrol or diesel car, FBT means part of the package is usually paid from after-tax pay, which takes back much of the tax saving.

Tips to Maximise Your Novated Lease Savings

Understanding how to structure your novated lease can help you extract the maximum benefit from the arrangement. Here are practical strategies for getting the best outcome:

• Consider an electric vehicle, the FBT exemption for battery-electric cars under the threshold ($91,661 for 2026-27) removes the post-tax contribution, so the whole package comes out of pre-tax pay, unlike a petrol car at the same price
• Bundle all running costs, include fuel, insurance, registration, servicing, and tyres in the lease to maximise the pre-tax deductions and GST savings
• Choose the right lease term, a 4 to 5 year term typically offers the best balance of fortnightly cost and residual value
• Negotiate the vehicle price, a lower purchase price means lower finance costs and a lower residual, saving you money throughout the lease
• Review annually, reassess your running cost budget each year to ensure it accurately reflects your driving patterns

Next Steps

The calculator gives you a starting point for understanding your potential novated lease savings. For exact figures, including your employer’s salary packaging arrangements, the provider’s finance rate and its fees, get a written quote from a novated lease provider and compare it with a car loan before you sign. If you would like someone to gather quotes and set them against a car loan, get connected with a novated lease specialist.