The numbers
| $80,000 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 | $2,456.92 | $2,456.92 |
| Take-home pay with the lease | $2,071.95 | $1,986.38 |
| Cost to take-home pay per fortnight | $384.97 | $470.55 |
| Tax and Medicare saved per year | $4,710 | $1,993 |
| Residual payout (incl. GST) | $16,555 | $12,335 |
| Total over 5 years incl. residual | $66,600 | $72,488 |
| Car loan at 8%, same running costs | $91,320 | $81,321 |
| Buy outright (4% interest forgone) | $91,324 | $81,324 |
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.
Reading the result
For the electric car, the lease saves about $24,700 over five years against a loan. The whole $14,720 package is pre-tax, and the GST on the car and running costs is claimed back. For the petrol car the saving shrinks to about $8,800: $8,000 a year must be paid from after-tax pay to cancel FBT, and fuel costs more. Both still beat the loan in this example, but the petrol result is sensitive to the interest rate and fees: at a lease rate a couple of points higher than the loan's, the gap narrows sharply. Test it with the slider.
What to watch on $80k
- HELP: if you have a debt, the EV's $20,755 reportable benefit raises repayment income from $80,000 to about $86,000, increasing the HELP repayment. Tick the box above.
- Family payments: reportable benefits may count in Services Australia's income tests.
- Cash flow: the residual of $16,555 is due in five years; set aside some of the tax saving.
Verdict
On $80,000, a novated lease on an eligible electric car is very likely worth it if you would buy a new car anyway and expect to stay with your employer. For a petrol car it can still be worth it, but only with a competitive rate and low fees.
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.