What it is

A novated lease is a three-way agreement between you, your employer, and a leasing company. The employer makes the lease payments from your pre-tax salary (reducing your taxable income) and you pay a post-tax contribution to offset Fringe Benefits Tax — except for eligible electric vehicles, which are FBT-exempt.

Finance Frank models a novated lease as a liability with extra detail, linked to the income source that salary-packages it. The take-home calculator then automatically reduces taxable income by the pre-tax portion and reduces net pay by the post-tax ECM (or zero, for FBT-exempt EVs).

Adding a novated lease

1. Go to Liabilities (or the Liabilities tab on Wealth)
2. Click Add Liability
3. Set Type to Novated Lease
4. Fill in the Novated lease details panel that appears:
   • Salary-packaged via — pick the employer income source that funds the lease
   • FBT-exempt vehicle — check this for eligible EVs / PHEVs (skips the ECM)
   • Pre-tax annual ($) — combined annual cost of the rent + included running costs
   • Post-tax ECM ($/yr) — your annual Employee Contribution Method amount (typically 20% of the car's base value under the Statutory Formula). Disabled when FBT-exempt is on.
   • Residual at lease end ($) — the balloon payable when the lease ends
   • Lease end date
   • Pre-tax bundle covers — tick what's included (fuel/charging, maintenance, registration, insurance)

How it affects your take-home

On the linked income source, the take-home preview will:

• Reduce your taxable income by the pre-tax annual amount (PAYG is calculated on the lower number)
• Subtract the post-tax ECM from your net take-home (zero if FBT-exempt)
• Show the lease in the "Pulled from your data" panel with a deep-link back to the liability if you need to edit it

Example

$80k salary, novated lease $18k/yr pre-tax, $2.4k/yr ECM (Statutory Method, not FBT-exempt):

• Taxable income drops from $80k to $62k
• PAYG tax calculated on $62k
• Net take-home reduced by another $2.4k/yr (the ECM contribution paid post-tax)

For an eligible EV under the LCT threshold, the same lease would have $0 ECM — the entire $18k/yr is pre-tax with no offset required.

ECM under the Statutory Formula is generally 20% of the car's GST-inclusive value. Confirm exact amounts with your novated lease provider before relying on the projection.