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Novated Lease Check

Methodology

The calculator works out the yearly cost of a novated lease after income tax, Medicare levy and FBT, using ATO figures for 2026-27 checked on 17 Oct 2026, and compares it with paying cash. Each step below gives the formula, the source and a worked figure for a $60,000 battery electric car on a $100,000 salary over 3 years at an example 8% rate.

The code is pure functions in one file with automated tests for tax bracket edges, the EV rules, the payment formula and the quote checker. Built and owned by Abdisalan Awale, ABN 64 886 470 398, based in Melbourne. Qualified reviewer: none yet. The method has not been reviewed by a qualified third party.

1. Inputs and validation

Inputs are checked against fixed ranges before anything is calculated: Annual taxable salary 0 to 10,000,000; Car drive-away price 1 to 2,000,000; Registration and stamp duty 0 to 2,000,000; Residual % 0 to 100; Interest rate 0 to 30; Annual running costs 0 to 1,000,000; GST-bearing running costs 0 to 1,000,000. Registration and stamp duty must be less than the drive-away price; GST-bearing running costs cannot exceed total running costs. Errors appear beside the field. The term is limited to 1 to 5 years.

2. EV FBT treatment

Checked in this order (ATO):

  1. Petrol or diesel: not exempt, statutory rate 20%.
  2. Plug-in hybrid: not exempt unless you tick "financial commitment made before 1 Apr 2025". Under the announced scenarios a PHEV is never exempt.
  3. Not first held and used on or after 1 July 2022: not exempt.
  4. You have not confirmed that LCT has never been payable (box unticked): not exempt. This confirmation, with the car type and first-held date, is the eligibility basis.
  5. Otherwise exempt (taxable value nil), still reportable.

Price screen: if the drive-away price is above the 2026-27 LCT fuel-efficient threshold ($91,661, ATO) we show a warning asking you to check LCT was never payable. It does not change the result. Using the drive-away price for this check is a screening assumption we have not verified.

Announced scenarios (NOT YET LAW, ATO): for a lease from 1 April 2027, price above $75,000 gets a 15% statutory rate; from 1 April 2029 all eligible EVs get 15%. Which value the $75,000 test applies to is not verified; we use the drive-away price. Example: exempt, rate 0%.

3. GST assumption

Off by default. When on, the employer is assumed to claim GST credits: the amount financed is reduced by 1/11 of the GST-inclusive car price excluding registration and stamp duty (which carry no GST), running costs are reduced by 1/11 of the part you mark as GST-bearing only, and the type 1 gross-up is used. When off, all amounts are GST-inclusive and type 2 is used. The car GST credit is capped at $6,353, which is 1/11 of the 2026-27 car limit of $69,883. The ATO says this is the general maximum, subject to some exceptions, and it also applies to fuel-efficient cars (ATO car limit, ATO GST and motor vehicles). Whether a given employer can claim the credits at all remains an assumption (not verified). Example: off, so amount financed = $60,000.

4. Residual

Defaults to the ATO minimum residual value for the term, 8-year effective life: 1 yr 65.63%, 2 yr 56.25%, 3 yr 46.88%, 4 yr 37.5%, 5 yr 28.13% (TD 93/142, ATO ID 2002/1004). You can enter your lessor's figure instead; the result then labels it a custom residual and warns if it is below the ATO minimum for the term (consequences not verified; ask the lessor). Finance balloon = amount financed × residual %. Example: 46.88% × $60,000 = $28,128.

5. Residual you pay

You pay the residual at the end from post-tax money, so we use drive-away price × residual %, including GST even when the GST assumption is on (GST treatment not verified; ask your lessor). Example: $28,128.

6. Lease payments

Standard annuity with a balloon, monthly in arrears: payment = (P − B ÷ (1 + i)n) × i ÷ (1 − (1 + i)−n), where P is the amount financed, B the balloon, i the annual rate ÷ 12 and n the months. At 0% it is (P − B) ÷ n. No establishment, admin or provider fees are added (ask your provider about fees). Example: $14,235 a year.

7. Package

Package = lease payments + running costs (less 1/11 of the GST-bearing part if the GST assumption is on). Example: $14,235 + $5,000 = $19,235.

8. FBT base value and taxable value

Base value = drive-away price − registration and stamp duty. The ATO base value includes GST, LCT, dealer delivery and fitted non-business accessories and excludes registration and stamp duty (ATO). Taxable value = base value × statutory rate × C/D, less employee contributions. C is the number of days in the FBT year the car is available for private use and D is the number of days in the FBT year (365, or 366 in a leap year) (ATO). The lease start date sets C: the default 1 April start gives C/D = 1; a 1 October 2026 start gives 182/365 for 2026-27. C/D applies only to the taxable value. Lease payments, running costs and the tax saving are split across FBT years by lease time, so over the term they add up to exactly the contract amounts. From the FBT year after the 4th anniversary the base value is reduced by one-third (ATO). We apply it from the first FBT year starting later than the 4th anniversary of the lease start (from 1 April 2031 for a 1 April 2026 start), assuming the car is first held when the lease starts (other cases not verified), and show the yearly net cost as the average over the term. Example: $60,000 × 0% = $0.

9. Employee contribution method

Post-tax contribution (E) = the lower of the taxable value and the package. Remaining taxable value = taxable value − E (ATO formula (A × 20% × C/D) − E). Example: $0.

10. FBT on any remainder

FBT = remaining taxable value × gross-up (2.0802 type 1 or 1.8868 type 2) × 47% (FBT years to 31 March 2027; ATO). We assume this FBT is salary-packaged pre-tax and use the same rate for later years (not verified). Example: $0.

11. Pre-tax and post-tax split

Pre-tax deduction = package − post-tax contribution + FBT. Post-tax = the employee contribution. Example: pre-tax $19,235, post-tax $0.

12. Income tax and Medicare levy

Resident rates 2026-27 (ATO): above $0: $0 + 0%; above $18,200: $0 + 15%; above $45,000: $4,020 + 30%; above $135,000: $31,020 + 37%; above $190,000: $51,370 + 45%. Plus Medicare levy 2% flat. Not modelled: the Medicare levy low-income reduction, the Medicare levy surcharge, offsets, HELP and rates after 2026-27 (not verified). Tax is worked out on salary before and on salary − pre-tax deduction. Example: $22,520 before, $16,365 after, saving $6,155.

13. Net cost

Net yearly cost = pre-tax + post-tax − tax saving, worked out for each lease year and averaged over the term; fortnightly = yearly ÷ 26. Example: $13,080 a year, $503 a fortnight.

14. Reportable fringe benefit estimate (exempt EVs)

Estimate for each FBT year = that year's base value × 20% × C/D × 1.8868 (type 2 gross-up). The calculator shows the first FBT year. The method is not verified; the ATO says exempt EV benefits remain reportable (ATO). Example: $22,642.

15. Comparison with buying outright

Lease total = sum of each year's net cost + residual you pay. Cash total = drive-away price + running costs × term (after-tax, GST-inclusive). Interest you could earn on the cash, resale value differences, car loans and fees are not modelled. Example: lease $67,368, cash $75,000.

16. Quote checker

On the quote checker, the implied rate is the annual rate (monthly, in arrears) that makes the step 6 formula equal the quoted finance payment, found by bisection between 0% and 100%. No answer is shown if no rate in that range fits. The residual is shown as a percentage of the amount financed and flagged if it is more than 0.5 percentage points from the ATO minimum for the term. Cost of finance = payments × months + residual − amount financed.

What we leave out

Changelog

See the sources page for sourced figures.

By Abdisalan Awale, editor. Published by Abdisalan Awale, ABN 64 886 470 398 (about us). Last reviewed 17 Oct 2026 against the sources on our sources page. Not yet reviewed by a qualified third party. How we calculate: methodology.