Novated Lease Calculator

The cost model works in four layers. First, the annual lease commitment: the vehicle price minus its ATO residual value is divided by the lease term and a representative finance margin is added, then annual running costs (fuel, insurance, registration, servicing) are included — this total is what you salary sacrifice. Second, the tax saving: because that amount comes out of pre-tax income, your income tax falls by your marginal rate on each dollar, and taxable income reduced by packaging also lowers the 2 per cent Medicare Levy — the calculator recomputes ATO-style tax on both salaries and takes the difference. Third, the fringe benefits tax offset: under the employee contribution method (ECFM) you make a small post-tax contribution each year equal to the FBT the employer would otherwise owe (2 per cent of the car's value, grossed up at 1.8868 and taxed at 47 per cent), which zeroes the FBT bill at minimal cost. Fourth, the GST benefit: the lease provider claims input tax credits on the purchase (capped at $5,000 for vehicles over the car depreciation limit, which is why the savings are prorated over the term) and on running costs. The headline weekly figure subtracts the tax and GST savings from the sacrifice, adds the employee contribution, and compares the result against financing the same car at a typical secured rate and paying running costs yourself.

• 1

  Get Three Quotes From Different Lease Providers

  Novated lease pricing varies materially between providers — the finance margin, administration fees and discount arrangements on the vehicle price are each negotiable. Request quotes from at least three providers for the same car and term, and feed the running-cost assumptions from each into this calculator. A 1 per cent difference in the finance margin on a $50,000 car is roughly $2,500 of interest over five years.

• 2

  Confirm the Super and Leave Impacts in Writing

  Before signing, confirm in writing that your employer will continue calculating your super guarantee and accruing leave on your pre-sacrifice salary, and that the arrangement is portable if you change jobs (a novation transfer to the new employer). These two clauses are where novated leases quietly fail for changing employees — negotiate them upfront so the tax benefit does not cost you retirement savings or continuity.

• 3

  Model the Residual Before You Sign

  Run the calculator at the ATO residual for your chosen term and ask yourself how you would fund that lump sum at termination — from savings, the car's sale or a refinance. If the car's realistic second-hand value at lease end is near the residual, you have a clean exit; if it is below, budget the shortfall. Many lease providers allow you to trade up into a new lease at the end, rolling the residual into the next arrangement — convenient, but it means you carry the cost forever.