A novated lease can be one of the most tax-effective ways to get into a car when you’re employed — but the numbers behind it confuse almost everyone, because your car is paid for out of a mix of your pre-tax and post-tax salary. This page shows you exactly what a novated lease calculator works out, walks through a worked example, and explains the two things that trip people up: FBT and the Employee Contribution Method (ECM).
Alpha390 facilitates novated leases through a specialist novated-lease partner, so once you’ve seen roughly how the numbers stack up, we can arrange your exact figures for your salary, car and employer. If you want the background first, here is how a novated lease is arranged.
Novated lease calculator
An indicative estimate built on current ATO rates and thresholds. It is not a quote, not credit advice and not tax advice.
Assumptions, method and sources
Three separate concepts, deliberately not conflated.
1. The ATO minimum residual is the GST-inclusive vehicle cost multiplied by the minimum percentage for the term in ATO Taxation Determination TD 93/142, based on an eight year effective life: 65.63 percent for one year, 56.25 for two, 46.88 for three, 37.50 for four and 28.13 for five. The residual the ATO works from is the cost of the car before any trade-in credit reduces it.
2. The finance calculation is done entirely on GST-exclusive amounts. Under a fully novated lease the financier claims a GST credit on the purchase of the vehicle, and the employer claims a GST credit for the GST included in the lease charges, so the amount financed and the monthly payment shown here both exclude GST. The payment amortises the GST-exclusive amount financed down to the GST-exclusive equivalent of the residual.
3. Taking ownership at the end of the lease is a separate transaction from the lease itself. GST applies to the residual payment, and it is paid from post-tax money, so the residual shown here is the GST-inclusive figure. An employee buying the car personally is generally not able to claim a GST credit on it.
Fringe benefits tax. The base value of the car includes GST and luxury car tax and excludes registration and stamp duty. Where the car is not exempt, the Employee Contribution Method is applied: a post-tax contribution equal to 20 percent of the base value each year, which reduces the taxable value of the car fringe benefit to nil. Where the car is a battery electric or hydrogen fuel cell vehicle priced below the luxury car tax threshold for fuel-efficient vehicles of 91,661 dollars for 2026 to 2027, the exemption is applied and no post-tax contribution is required. The exemption also requires the car to have been first held and used on or after 1 July 2022.
Income tax. Resident rates for 2026 to 2027 are used: nil to 18,200 dollars nil, 18,201 to 45,000 at 15 cents, 45,001 to 135,000 at 4,020 dollars plus 30 cents, 135,001 to 190,000 at 31,020 dollars plus 37 cents, and above 190,000 at 51,370 dollars plus 45 cents. The Medicare levy of 2 percent is added separately, because the ATO rate table excludes it.
Not modelled. Credit approval or any actual rate offer. Luxury car tax where it is payable. State stamp duty and registration differences. Individual employer salary packaging policies and fees. Trade-ins. HELP or HECS debts, offsets and other income. Reportable fringe benefits on your payment summary. Plug-in hybrids. Any comparison against a car loan or an outright purchase.
Primary sources, retrieved 15 October 2026: ATO Taxation Determination TD 93/142; ATO Car leasing and FBT; ATO Taxable value of a car fringe benefit; ATO GST and vehicles purchased under novated leases; ATO GST, hire purchase and leasing; ATO Electric cars exemption; ATO Luxury car tax rate and thresholds; ATO Tax rates for Australian residents.
This calculator produces an indicative estimate only. It is general information, not credit, financial or tax advice, and it does not take your objectives, financial situation or needs into account. It is not a quote and does not represent an offer of finance. Alpha390 facilitates novated leases through a specialist novated lease partner. FBT and salary packaging outcomes depend on your employer, your circumstances and the ATO rules current at the time. Five Tees Pty Ltd, Australian Credit Licence 506065.
What a novated lease calculator actually works out
A good calculator takes your inputs and estimates the impact on your take-home pay. The inputs that matter:
| Input | Why it matters |
|---|---|
| Car purchase price | Sets the lease and the FBT base value |
| Your gross salary | Determines your marginal tax rate and the tax saved |
| Lease term (1–5 yrs) | Longer term = lower payment, more interest overall |
| Annual kilometres | Feeds the running-cost budget (fuel, tyres, servicing) |
| Running costs bundled | Fuel, insurance, rego, servicing, tyres can be packaged in |
| FBT method (ECM) | Whether post-tax contributions are used to cancel FBT |
| EV or not | Eligible EVs can be FBT-exempt — a big difference |
The outputs you're looking for: your estimated pre-tax deduction, your post-tax (ECM) contribution, the income tax you save, the GST you save on the car and running costs, and — the number that matters most — your estimated change in take-home pay.
Worked example (illustration only)
A $45,000 car, 5-year lease, ~15,000 km/yr, employee on a $95,000 salary, running costs packaged, using ECM:
| Vehicle + running costs (annualised) | ~$14,500 |
| Paid from pre-tax salary | ~$9,500 |
| Paid from post-tax salary (ECM, to offset FBT) | ~$5,000 |
| Income tax + GST saved (approx.) | ~$3,000–$4,000 / yr |
| Net cost vs a normal car loan | Typically lower for eligible employees |
This is an illustration to show how the pieces fit together — not a quote or tax advice. Your real figures depend on your salary, employer, car, kilometres and the current FBT rules.
The bit everyone gets stuck on: FBT and ECM
Because you're getting a private benefit (a car) from pre-tax salary, the ATO applies Fringe Benefits Tax. The Employee Contribution Method is the common way to deal with it: you pay part of the car's cost from your post-tax salary, which reduces the taxable value of the benefit — often to nil. That's why a novated lease is split across pre-tax and post-tax money. Our novated lease vs salary sacrifice explainer goes deeper on how the packaging works.
Electric vehicles: the FBT exemption
Eligible electric vehicles under the luxury-car-tax threshold can be exempt from FBT, which removes the post-tax contribution and makes an EV novated lease dramatically cheaper than the petrol equivalent. If you're considering an EV, read electric car novated leases in Australia.
Limitations of any calculator
A calculator is a guide, not a guarantee. It can't see your employer's specific policy, the exact interest rate a financier will offer, your precise running costs, or changes to FBT rules. Treat the output as a realistic estimate to decide whether a novated lease is worth pursuing — then get exact figures before you commit.
Get your exact figures
Once you know a novated lease is in the running, we'll arrange precise, personalised numbers for your salary, car and employer through our novated-lease partner. Request your novated lease figures and we'll take it from there. Not sure a novated lease is right for you? Compare it in novated lease vs car loan or weigh the pros and cons. See also our car finance options and how long approval takes.
Novated lease calculator FAQs
How is a novated lease calculated?
A novated lease is calculated by packaging your car's lease payment plus running costs and splitting the cost across your pre-tax and post-tax salary. Pre-tax deductions reduce your income tax; post-tax contributions (the Employee Contribution Method) offset Fringe Benefits Tax. The result is your estimated change in take-home pay.
What inputs does a novated lease calculator need?
Typically the car price, your gross salary, the lease term, annual kilometres, which running costs you bundle in, whether the car is an EV, and the FBT method used.
Is a novated lease cheaper than a car loan?
For many eligible employees, yes — because you save income tax and GST. But it depends on your salary, the car, your kilometres and your employer's policy.
Are electric vehicles better on a novated lease?
Often significantly. Eligible EVs under the luxury-car-tax threshold can be FBT-exempt, which removes the post-tax contribution.
Can Alpha390 give me exact novated lease figures?
Yes. Alpha390 facilitates novated leases through a specialist partner. Share your salary, car and employer details and we arrange precise, personalised figures — general information, not tax advice.
This article is general information only and does not constitute credit, financial or tax advice. Novated leasing is facilitated through a specialist partner; Alpha390 Finance arranges the enquiry. Fringe Benefits Tax and salary-packaging outcomes depend on your circumstances and current ATO rules — confirm with your employer and a registered tax adviser. Alpha390 Finance operates under Australian Credit Licence 506065 (Five Tees Pty Ltd). Any figures shown are illustrations only, not a quote.
