Novated lease residual values and the end of the lease
The residual (or balloon) is the amount still owing when a novated lease ends. For a car with an 8-year effective life the ATO minimum residual values are 65.63% of cost after 1 year, 56.25% after 2, 46.88% after 3, 37.5% after 4 and 28.13% after 5. Source: ATO (TD 93/142 and ATO ID 2002/1004).
The novated lease calculator uses this table as its default residual. For an overview, read how a novated lease works.
ATO minimum residual value table
| Lease term | Minimum residual (% of cost) | Residual on $50,000 | Annual lease payment at 8% (example) |
|---|---|---|---|
| 1 year | 65.63% | $32,815 | $20,564 |
| 2 years | 56.25% | $28,125 | $14,122 |
| 3 years | 46.88% | $23,440 | $11,863 |
| 4 years | 37.5% | $18,750 | $10,655 |
| 5 years | 28.13% | $14,065 | $9,869 |
Sources: TD 93/142 · ATO ID 2002/1004. Checked 17 Oct 2026.
The annual payment column comes from our calculator (monthly payments in arrears, no fees, example rate). It shows the trade-off: a short lease has a higher residual and lower payments; a long lease the reverse, with more interest overall.
Can the residual be different from the ATO table?
The ATO figures are minimums. A quote may show a different figure. What happens if a residual is set below the minimum is not covered in our verified sources; ask your lessor. If a quote's residual looks different, the quote checker compares it with the table and asks you to query it. The calculator lets you override the default.
Is the residual GST-inclusive?
In our model you pay the residual yourself, from post-tax money, including GST, because the GST credit assumption only applies to amounts the employer pays (check the GST treatment of residuals with your lessor). When you tick the GST assumption, the finance balloon is ex-GST but the amount you pay at the end is shown including GST. See methodology step 5.
What happens at the end of a novated lease?
The residual falls due. Your lease agreement sets the options and their costs, and we have not verified a general rule, so ask your lessor. Before signing, ask the lessor in writing:
- Can I pay the residual and keep the car, and how is the payout figure worked out?
- Can I refinance the residual into a new lease, and at what rate?
- Can I sell or trade the car to cover the residual, and who keeps any surplus or covers any shortfall?
- What happens if I pay out early, or if my employment ends before the term?
Is a longer or shorter lease better?
Neither is better in general. Our comparison on the calculator includes the residual in the total cost over the term, so you can change the term and see how the total moves. A longer lease spreads payments over more years, which can be useful for an EV if the exemption rules change for new leases after 1 April 2027 (announced, NOT YET LAW; existing leases said not to be impacted; see EV FBT exemption).
Frequently asked questions
What are the ATO residual value guidelines for novated leases in 2026?
For cars with an 8-year effective life, the ATO minimum residual values are 1 year 65.63%, 2 year 56.25%, 3 year 46.88%, 4 year 37.5%, 5 year 28.13% of cost (TD 93/142 and ATO ID 2002/1004).
What is a novated lease balloon payment?
Another name for the residual: the lump sum still owing when the lease ends. It is set at the start as a percentage of the cost.
Do you have to buy the car at the end of a novated lease?
The residual has to be dealt with. Your agreement sets the options and their costs, so ask your lessor.
Can I pay off a novated lease early?
The lessor sets early payout terms and costs. We have not verified them; ask for the payout figure in writing.
What happens after 5 years of a novated lease?
A 5-year lease ends with a residual of at least 28.13% of the cost under the ATO table. What you can do then depends on your agreement; ask your lessor.
By . 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.