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A novated lease packages a car from your pre-tax salary, saves the GST on the purchase and running costs, and — for an eligible electric car — pays no FBT at all. Compare it against buying the same car yourself, with real tax figures for 2026–27. Unlike lease-provider calculators, this one has nothing to sell you.
Gross salary before tax, excluding super.
GST-inclusive. Under a novated lease you don't pay the GST, up to a $6,334 credit.
ATO minimum residual for 5 years: 28.13% of the amount financed.
Running costs: fuel or charging, rego, insurance, servicing and tyres. Lease quotes bundle these; 8–10% is a typical novated finance rate — check your quote.
Estimated saving with the novated lease
$6,353 a year
≈ $31,763 over the 5-year term
A residual of $14,065 (plus GST) is payable to own the car at the end — the same balloon structure is assumed on the buy side, so it doesn't change the comparison. Packaged benefits create a reportable fringe benefits amount that can affect HELP repayments, the Medicare levy surcharge and family payments.
The lease finances $50,000 (the GST-exclusive price — $5,000 GST saved up front) and the whole package runs from pre-tax salary because the car is FBT-exempt.
Every dollar packaged escapes tax at the marginal rate, so the tax saving alone is thousands a year on top of the GST — the reason EV novated leases dominate the market.
A $55,000 petrol car has an FBT taxable value of $11,000 (20% statutory rate), so $11,000 of the package is paid post-tax under the employee contribution method to cancel the FBT.
Only the remainder runs pre-tax. The GST savings still apply, but the tax saving is far smaller — a petrol novated lease is often only marginally ahead of buying outright.
It depends almost entirely on the car and your marginal tax rate. For an eligible electric car the answer is usually yes: no FBT, no GST on the purchase or running costs, and the whole package pre-tax. For petrol and diesel cars the employee contribution method wipes out most of the pre-tax benefit, so the saving is mostly the GST — run the numbers above rather than trusting a provider's quote, and watch the finance rate and bundled running-cost margins, which is where providers make their money.
A battery electric or hydrogen fuel-cell car first held and used on or after 1 July 2022, under the $91,661 fuel-efficient LCT threshold, is exempt from FBT on a novated lease. Lease payments, charging, rego, insurance and servicing all come out of pre-tax salary. Note the value is still a reportable fringe benefit (RFBA) — it doesn't add tax, but it counts towards income tests like HELP repayments and the Medicare levy surcharge. Plug-in hybrids stopped qualifying on 1 April 2025.
The ATO sets minimum residual values so a novated lease is a genuine lease rather than a disguised loan: 65.63% after 1 year, 46.88% after 3 and 28.13% after 5. At the end of the term you pay the residual (plus GST) to keep the car, refinance it into a new lease, or sell the car — if it's worth more than the residual, the difference is yours tax-free.
Tax figures use 2026–27 resident rates; FBT and GST settings follow the ATO pages below. Compare against a real quote before signing.
A novated lease is a three-way agreement between you, your employer and a finance company. Your employer makes the lease and running-cost payments out of your salary — mostly pre-tax — and the obligation 'novates' (transfers) with you if you change jobs, back to you.
Because the employer is the one paying, the car is a fringe benefit. For petrol cars the FBT is usually cancelled by a post-tax employee contribution; for eligible electric cars the benefit is FBT-exempt, which is what makes EV novated leases so tax-effective.
The employer also claims GST credits on the purchase price (capped at the car limit) and running costs, so you effectively pay GST-free.
ATO rates checked against official sources — verified 19 July 2026
Estimates only. Not financial or tax advice. Full disclaimer for your rights and our limitations of liability.
Rates and thresholds last updated for the 2026–27 financial year.