Novated Lease Calculator

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 electric and plug-in hybrid vehicles priced below the $91,387 threshold, it applies the FBT exemption which dramatically increases your savings.

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 included in the pre-tax salary deduction 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 includes the vehicle finance component (excluding GST) and the budgeted running costs (excluding GST). 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 current 2024-25 Australian tax brackets and the 2% Medicare Levy.

GST Saving

Under a novated lease, the finance company claims the GST credits on the vehicle purchase price and running costs, passing the savings to you through lower lease payments. The GST saving is approximately 9.09% (1/11th) of the total vehicle price and running costs. On a $50,000 vehicle with $6,000 in annual running costs, the GST saving is approximately $1,455 per year over a 5-year lease.

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 (ECM), where you make post-tax contributions to offset the FBT liability. The calculator shows the estimated post-tax contribution required. For eligible electric vehicles, the FBT is shown as “Exempt”, meaning no post-tax contributions are required and your savings are maximised.

Fortnightly Cost Comparison

The fortnightly comparison shows the true cost difference between a novated lease and buying a car with after-tax income. 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 shows the actual pre-tax deduction from your salary each fortnight.

Novated Lease Savings by Income Level

Your income level directly affects your novated lease savings because the tax benefit is tied to your marginal tax rate. Here is a general guide to expected annual savings on a $50,000 vehicle with a 5-year lease:

Figures are indicative and based on a $50,000 vehicle with $6,000 annual running costs over a 5-year lease. Actual savings vary based on individual circumstances.

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 EVs under $91,387 can more than double your savings compared to a petrol vehicle at the same price point
• 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 solid starting point for understanding your potential novated lease savings. For exact figures tailored to your specific situation, including your employer’s salary packaging arrangements and the best available finance rates, get in touch for a personalised quote. Our team compares options from multiple novated lease providers to ensure you get the most competitive deal.