Novated lease net cost (EV FBT-exempt).
Effective annual cost
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Paying for a car with pre-tax salary
A novated lease is a three-way arrangement between you, your employer and a leasing company. Your employer redirects part of your salary, before income tax is taken out, to cover the lease finance and often the running costs too. Because that money never gets taxed at your marginal rate, the car effectively costs you less than buying it with take-home pay. This calculator models the heart of that benefit: it takes your annual lease and running costs and your marginal rate including the 2 percent Medicare levy, and shows the effective after-tax cost once the salary-sacrifice saving is applied.
The electric-car exemption that changed the maths
The reason novated leases have exploded since 2022 is the fringe benefits tax exemption for eligible electric vehicles priced under the fuel-efficient luxury car threshold. Normally, providing a car through salary sacrifice creates an FBT liability that has to be neutralised, often by paying part of the cost from post-tax dollars. For a qualifying EV, that FBT simply does not apply, so the entire package, finance plus electricity, insurance, rego and servicing, can come from pre-tax salary. That is what the calculator assumes when the FBT-exempt EV box is ticked, and it is why the saving is so much larger for an EV than for a petrol car.
An $18,000 EV package on a 39 percent rate
Say your novated lease plus running costs total $18,000 a year, and your marginal rate including Medicare is 39 percent. With an FBT-exempt EV the whole $18,000 comes out pre-tax, so you avoid 39 percent of tax on that salary. The effective cost falls to $10,980, a saving of $7,020 a year against paying for the same car with post-tax dollars. The table shows the split.
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Why a petrol car saves so much less
Untick the EV box and the picture changes. A conventional car still generates FBT, and the common way to handle it is the employee contribution method, where you pay roughly half the cost from post-tax dollars to cancel the taxable benefit. The calculator reflects this with a rough fifty-fifty pre-tax split, so the saving shrinks to around half of the EV result. This is a deliberate approximation, not a precise FBT computation, because the exact figure depends on the car's value and the statutory method your provider uses. Treat the petrol result as a guide and ask your leasing company for a full quote before committing.
The fine print before you sign
This tool is for salaried employees weighing an EV novated lease, and for anyone comparing the pre-tax route against a straight car loan. Two cautions from experience. First, watch the balloon or residual payment at the end of the lease, which the calculator does not include and which can be substantial. Second, a novated lease is tied to your employer, so if you change jobs the lease may need to be re-novated or you may have to cover payments yourself for a time. The EV saving is real and often large, but it is a financing decision with strings, not free money.
Does the EV exemption remove FBT reporting entirely?
Not quite. An eligible EV pays no FBT, but the benefit is still a reportable fringe benefit. That reportable amount does not add to your taxable income, yet it can affect income tests for things like the Medicare levy surcharge, certain government payments and HELP repayments, so it is worth being aware of.
Are plug-in hybrids still eligible?
The exemption for plug-in hybrid electric vehicles ended on 1 April 2025 for new arrangements. Battery electric and hydrogen fuel-cell vehicles under the threshold remain eligible, so if you are looking at a plug-in hybrid now, do not assume it qualifies for the full pre-tax treatment shown here.