The numbers
| $120,000 salary, 5-year lease | $55,000 EV | $40,000 petrol |
|---|---|---|
| Pre-tax deduction per fortnight | $566.14 | $239.51 |
| Post-tax (ECM) deduction per fortnight | $0 | $307.69 |
| Take-home pay before, per fortnight | $3,503.08 | $3,503.08 |
| Take-home pay with the lease | $3,118.11 | $3,032.53 |
| Cost to take-home pay per fortnight | $384.97 | $470.55 |
| Tax and Medicare saved per year | $4,710 | $1,993 |
| Total over 5 years incl. residual | $66,600 | $72,488 |
| Car loan at 8%, same running costs | $91,320 | $81,321 |
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's the same as $80k
In 2026-27 the 30% bracket runs from $45,001 to $135,000. Both $80,000 and $120,000, before and after packaging about $14,720, stay inside it, so every packaged dollar saves 32 cents either way. Above $135,000 the rate is 37%, so a salary of, say, $145,000 would save 39 cents on the part of the package above the boundary. Try it in the calculator.
What is different on $120k
- HELP: repayment income for the EV becomes about $126,000 ($105,280 taxable plus $20,755 reported), close to the 17% band at $129,717.
- Medicare levy surcharge: without private hospital cover, MLS income including the reportable benefit is well above the $105,000 singles threshold (reported). You may already pay MLS on $120,000; the reported benefit can move you to a higher MLS tier.
- Private health rebate: the same income definition can lower your rebate tier.
Verdict
On $120,000 the core saving is the same as on $80,000 and an eligible EV lease is very likely worth it. Check the income-test side effects, especially if you have HELP or no private hospital cover.
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.
What providers don't show, and how to read a quote
- The interest rate. Many quotes show only a weekly or fortnightly deduction. Ask for the interest rate, the amount financed and the residual in writing; with those, this calculator reproduces the lease payment.
- Fees. Establishment fees, monthly management fees and "budget" fees for running costs add up over five years. Enter them all.
- Running-cost budgets. Quotes often include generous fuel, tyre and servicing budgets that inflate the per-pay deduction. Unspent budgets are usually returned, but check how and when.
- Insurance and extras. Gap insurance, extended warranties and paint protection are often bundled. They are optional.
- The residual. It must be at least the ATO minimum for the term. A higher residual lowers your deductions but leaves more to pay at the end.
- Discounts on the car. Providers negotiate fleet prices, but compare the drive-away price with what a dealer would offer you directly.