Novated Lease Calculator
Calculate the tax savings and net fortnightly cost of a novated lease versus buying a car outright, using 2024-25 Australian tax brackets.
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Frequently Asked Questions
What is a novated lease?
A novated lease is a three-way agreement between you, your employer, and a finance company. Your employer deducts lease payments from your pre-tax salary, reducing your taxable income. The result is a lower income tax bill, which reduces the effective cost of running a car.
Who is eligible for a novated lease?
Any PAYG employee whose employer offers salary packaging can access a novated lease. It's most commonly used by employees in the public sector, healthcare, and large corporations. Self-employed individuals are not eligible.
Does FBT (Fringe Benefits Tax) apply to novated leases?
FBT can apply to novated leases, but many arrangements use the Employee Contribution Method (ECM) to reduce or eliminate FBT by having the employee contribute an after-tax amount equal to the FBT liability. Electric vehicles are FBT-exempt if under the LCT threshold.
What happens at the end of a novated lease?
At end of term, you can pay the residual value to own the car outright, re-lease the vehicle, or hand it back. The residual value is set by the ATO based on the lease term.
Is a novated lease worth it?
It depends on your marginal tax rate, the car price, and how much you drive. The higher your income, the more tax you save. Employees in the 37%+ tax bracket typically benefit most. Always compare total cost of ownership including residual, FBT, and running costs.
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