Novated lease rough check
A quick sense-check of a novated lease against buying outright, using FY 2026-27 resident tax rates. Other calculators: WFH deduction ยท EV home charging
The car and the lease
Residual defaults to the ATO minimum for the term you pick (8-year car life): 65.63%, 56.25%, 46.88%, 37.50% or 28.13%. The car limit is the 2025-26 figure; check the ATO for the current one. Medicare levy of 2% is included in the tax saving.
Your rough result
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Rates used
Tax, FY 2026-27 (residents): 0 to $18,200 nil; 15% to $45,000; 30% to $135,000; 37% to $190,000; 45% above, plus 2% Medicare levy.
Minimum residuals (cars, 8-year effective life): 1 yr 65.63%, 2 yrs 56.25%, 3 yrs 46.88%, 4 yrs 37.50%, 5 yrs 28.13%.
Non-EV: FBT statutory rate of 20% of the car's cost per year, which is cancelled out by paying that much from post-tax pay (the employee contribution method, ECM).
Sources: ATO tax rates, Australian residents; ATO TD 93/142 minimum residual values; ATO ID 2002/1004 (8-year car residuals). Checked 28 October 2026.
For the running costs above, estimate charging with the EV home charging cost calculator. Also see the WFH deduction calculator.
FAQ
What is a novated lease?
A three-way deal between you, your employer and a finance company. Your employer pays the lease and running costs from your salary, mostly before tax.
Why is an eligible EV different?
Under the electric car discount, eligible zero-emissions cars under the luxury car tax threshold for fuel-efficient cars are FBT-exempt, so the whole package can come from pre-tax pay with no post-tax contribution. The exempt amount still appears on your income statement as a reportable fringe benefit, which can affect things like Medicare levy surcharge, HELP repayments and some government payments.
What is the ECM?
For a non-exempt car, FBT would apply. Most leases avoid it by having you pay part of the cost (20% of the car's cost per year under the statutory method) from post-tax pay. That part gets no tax saving.
What is the residual?
A lump sum you owe at the end of the lease to own the car, or you can refinance it or sell the car. The ATO sets minimum residuals by lease term.
Why is my quote different?
Providers add fees, insurance, budgets for fuel or charging, and their own rates. This check ignores fees, interest you might earn by not buying outright, and how running costs change over time.