Novated Lease Calculator Australia 2025-26

The calculation combines three pieces: the lease payment, income tax and Fringe Benefits Tax (FBT).

Monthly lease payment (amortisation): P = price x r / (1 - (1 + r)^-n), where r = annual rate / 12 and n = term in months. Annual lease cost is P x 12.

FBT taxable value (statutory formula): fbtValue = car price x 20%. Under the Employee Contribution Method (ECM), a post-tax contribution equal to that fbtValue reduces the taxable value to zero, so no FBT is payable. The remainder of the lease cost is deducted from your salary before tax.

2025-26 income tax (resident, ATO):

The 2% Medicare levy is added on taxable income (simplified, above the low-income threshold).

Without a novated lease you pay tax on your full salary and buy the car out of take-home pay. With a novated lease, the pre-tax portion of the lease lowers your taxable income, so you pay less tax; the annual tax saving = tax without lease - tax with lease. The final take-home compares both scenarios after paying for the car.

Example: 50,000 AUD car, 5-year term, 7% rate, 90,000 AUD salary. fbtValue = 50,000 x 20% = 10,000 (post-tax contribution). Monthly lease payment about 990 AUD; annual cost about 11,881 AUD, of which 10,000 is post-tax (ECM) and about 1,881 is pre-tax. Reducing taxable salary by 1,881 saves that slice of tax plus Medicare, around 602 AUD a year.

Source: 2025-26 resident income tax brackets and the FBT statutory formula (20%), Australian Taxation Office (ato.gov.au).

Three scenarios computed with the same logic the tool uses (annual rate, term in months, ECM cancelling the FBT):

• 40,000 AUD car, 4-year term, 6.5% rate, 75,000 AUD salary. The FBT value (post-tax) is 8,000 AUD; the annual lease cost is around 11,383 AUD, of which roughly 3,383 is pre-tax. With that salary in the 30% + 2% Medicare bracket, the annual tax saving is about 1,083 AUD.
• 50,000 AUD car, 5-year term, 7% rate, 90,000 AUD salary. FBT value 10,000 AUD; annual cost about 11,881 AUD, with roughly 1,881 pre-tax. The annual tax saving is about 602 AUD.
• 65,000 AUD car, 5-year term, 8% rate, 150,000 AUD salary. FBT value 13,000 AUD; annual cost about 15,816 AUD, with roughly 2,816 pre-tax, this time in the 37% + 2% Medicare bracket, so the annual tax saving is about 1,098 AUD.

Note the pattern: the higher your marginal bracket and the larger the pre-tax portion of the lease, the bigger the saving. The post-tax (ECM) contribution does not create a direct tax saving, but it avoids the 47% FBT on the benefit value, which would usually be far more expensive.

Step 1: enter the car price (the GST-inclusive base value, which is what the FBT statutory formula uses).

Step 2: set the lease term in years and the lender's annual interest rate. These drive the monthly payment via amortisation.

Step 3: enter your gross annual salary. The tool computes your tax without a novated lease and with one (lowering the pre-tax portion), and shows the annual tax saving and your take-home pay in both scenarios.

The calculator assumes the Employee Contribution Method (ECM), where a post-tax contribution equal to the FBT taxable value (price x 20%) cancels the Fringe Benefits Tax; this is the most common structure in Australia. It does not include running costs such as maintenance, insurance, fuel or management fees, which are usually bundled into a fully maintained lease, nor the FBT exemption for eligible electric vehicles. It also does not model HELP/HECS or specific offsets.

Important notice: this calculator provides an indicative estimate for informational and educational purposes only. It is not tax, accounting or financial advice, and the result may differ from the official computation by your employer, your salary packaging provider or the ATO. For tax decisions, check ato.gov.au or consult a qualified adviser.

This calculator estimates the monthly lease payment and, more importantly, how much income tax you save by lowering your taxable salary, using the Australian 2025-26 income tax brackets (ATO) and the 2% Medicare levy. It applies the Employee Contribution Method (ECM): a post-tax contribution equal to the taxable value of the benefit (car price x 20% under the FBT statutory formula) cancels out the Fringe Benefits Tax. Enter the car price, term, interest rate and your gross annual salary to compare your take-home pay with and without a novated lease, plus the estimated annual tax saving.