The rule
HELP compulsory repayments are worked out on repayment income, not taxable income. Repayment income adds back reportable fringe benefits, among other things. Since 2025-26 repayments are marginal: in 2026-27, nothing up to $69,528, 15 cents per dollar above that up to $129,717, $9,028 plus 17 cents per dollar up to $186,050, and 10% of total repayment income above that.
Electric car: repayments can rise
With a $55,000 EV on a $100,000 salary, about $14,720 a year is packaged pre-tax, so taxable income falls to about $85,280. But the reportable fringe benefit is $20,755, so repayment income becomes about $106,035, higher than before. The HELP repayment rises from $4,571 to $5,476 a year. Take-home pay falls by about $420 a fortnight instead of $385 without a HELP debt. The lease still costs much less than a loan, but the HELP effect is real.
Petrol car with ECM: repayments fall
With a $40,000 petrol car on the same salary, $8,000 a year is paid post-tax (ECM), so there is no reportable benefit. Taxable income falls by the pre-tax part (about $6,230), and the HELP repayment falls from $4,571 to $3,637.
Worked figures come from this calculator with: 2026-27 tax rates and Medicare levy, a five-year lease at 8.5% interest, the ATO minimum residual (28.13%), a $500 establishment fee and $15 monthly fee, $3,500 on-road costs, 15,000 km a year, NSW registration of $1,100 and insurance of $1,500, paid fortnightly. Your provider's rate and fees will differ; change them in the calculator.
Why it works this way
Reportable fringe benefits exist so that income tests reflect the value of benefits you receive instead of salary. The EV exemption removes FBT, but the law still requires the benefit to be reported, so it still counts for HELP, the Medicare levy surcharge and some payments. Repaying HELP faster is not wasted money: your debt shrinks sooner, and it is indexed each year, so early repayment saves indexation. But it does reduce your take-home pay during the lease.
What to check
- Tick the HELP box in the calculator to see the change for your salary.
- If you are near the repayment threshold, a reported benefit can move you from no repayment to a repayment.
- Your employer's payroll withholds extra for HELP based on your pay; the final repayment is worked out on your tax return, so a reported benefit can mean a bill at tax time if withholding didn't account for it. Ask payroll to increase HELP withholding if needed.
How a novated lease works
A novated lease is a three-way agreement between you, your employer and a finance company. The finance company leases you a car; your employer agrees to make the payments out of your salary for as long as you work there. Your employer also pays the running costs (fuel or charging, registration, insurance, servicing and tyres) from the same budget. Because these come out of your pay before tax, your taxable income falls, and because your employer is registered for GST, it claims back the GST on the car and its running costs. At the end of the lease you pay a lump sum, the residual, to own the car, or you refinance or sell it.
The catch is fringe benefits tax (FBT). A car your employer pays for is a fringe benefit. For petrol and hybrid cars, providers cancel the FBT by having you pay part of the cost out of your after-tax pay: the employee contribution method (ECM). For eligible electric cars there is no FBT at all, so the whole cost can come out of pre-tax pay. That is why novated leases have become popular for electric cars.
The employee contribution method (ECM)
Under the statutory formula the taxable value of a car benefit is 20% of the car's base value (its price including GST, but not registration or stamp duty) each year. A $40,000 car has a taxable value of $8,000. FBT on that would be about $7,822 a year (the value grossed up at 2.0802 and taxed at 47%). Instead, the provider takes $8,000 a year from your after-tax pay. That contribution reduces the taxable value to nil, so there is no FBT, and the rest of the cost comes from your pre-tax pay. Your employer has to remit one-eleventh of your contribution as GST. After four full FBT years the base value drops by a third, so the post-tax contribution falls in year 5.