FBT on a novated lease

Under the ATO statutory formula, a novated lease car's FBT taxable value is 20% of its base value a year, less any employee contributions. For FBT years to 31 March 2027 the FBT rate is 47%. Paying the taxable value from post-tax salary (the employee contribution method) cuts the FBT to nil. Eligible EVs are exempt. Source: ATO.

See the effect on your pay in the novated lease calculator. For an overview, read how a novated lease works.

How is FBT calculated on a novated lease?

The ATO statutory formula is (A × 20% × C/D) − E:

• A is the base value of the car.
• C is the number of days in the FBT year the car was available for private use; D is the number of days in the FBT year (365, or 366 in a leap year). A full year gives C/D = 1. A lease starting on any date other than 1 April gives a first-year taxable value of A × 20% × (days from the start date to 31 March) ÷ D, minus E: for a 1 October 2026 start that is 182/365. The calculator has a lease start date for this. ATO
• E is the employee contribution: what you pay from after-tax money.

Kilometres travelled do not change the result under this formula. The FBT payable on any taxable value left after E is that amount × the gross-up rate × the FBT rate. Which gross-up applies depends on whether GST credits can be claimed: our calculator uses type 1 (2.0802) when you tick the GST assumption, otherwise type 2 (1.8868) (ask your employer which type applies to them).

Source: https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax/types-of-fringe-benefits/fbt-on-cars-other-vehicles-parking-and-tolls/cars-and-fbt/taxable-value-of-a-car-fringe-benefit

What goes into the base value?

The cost price of the car excluding registration and stamp duty, after any trade-in or employee cash payment, plus fitted non-business accessories, dealer delivery, GST and LCT. There is a one-third reduction from the FBT year after the 4th anniversary of when the car was first held. That is why the calculator asks how much of the drive-away price is registration and stamp duty. ATO

Worked example: the employee contribution method

A $40,000 petrol car, $100,000 salary, 3-year lease, example 8% rate, $4,000 running costs, full year, no GST assumption:

1. Base value: $40,000 (no registration or stamp duty entered).
2. Taxable value: $40,000 × 20% × 365/365 = $8,000.
3. Total package (lease + running costs): $13,490 a year.
4. Post-tax contribution (E): $8,000, so the remaining taxable value is $0 and FBT is $0.
5. The rest, $5,490, comes from pre-tax pay and saves $1,757 in income tax and Medicare levy.

The post-tax contribution gets no tax saving, which is why petrol cars benefit much less than exempt EVs.

What if the package is smaller than the taxable value?

Then post-tax contributions cannot cover the whole taxable value and some FBT is left. Example: a $100,000 petrol car on a 5-year lease at 0% interest with no running costs. Taxable value $20,000; package $14,374; post-tax contribution $14,374; leftover taxable value $5,626; FBT $5,626 × 1.8868 × 47% = $4,989. Our model assumes that FBT is salary-packaged from pre-tax pay (ask your employer and lessor how they handle it).

Does an electric car pay FBT?

Not if it meets the exemption conditions: zero or low emission, first held and used on or after 1 July 2022, LCT never payable; PHEVs excluded from 1 April 2025 unless there was a pre-existing commitment. It is still a reportable fringe benefit. ATO. Details: EV FBT exemption.

By Abdisalan Awale, editor. Published by Abdisalan Awale, ABN 64 886 470 398 (about us). Last reviewed 17 Oct 2026 against the sources on our sources page. Not yet reviewed by a qualified third party. How we calculate: methodology.