Novated Lease on a Petrol or Diesel Car
A conventional petrol or diesel car doesn't get the FBT exemption, so a novated lease on it works the traditional way: you package the car from pre-tax salary, but Fringe Benefits Tax applies and offsets part of the saving. It can still come out ahead — the question is by how much, and that depends on your income, the car's price and how you handle the FBT.
Where the saving still comes from
Even without the exemption, a novated lease on a petrol or diesel car has two genuine advantages. First, GST: you don't pay GST on the purchase price (within limits) or on the running costs packaged through the lease, an immediate saving. Second, running costs and part of the finance come from pre-tax salary, lowering your taxable income.
Against that sits FBT. Most novated leases use the statutory formula method, where FBT is calculated as a flat percentage of the car's value regardless of private use. Employee after-tax contributions (the 'employee contribution method') are commonly used to reduce the taxable value of the benefit to nil — the calculator models this so you see the net position, not just the gross saving.
When a petrol novated lease makes sense
The higher your marginal tax rate and the more you drive, the better a conventional novated lease looks, because more of your motoring costs shift to pre-tax dollars and the GST saving on fuel and servicing adds up. For lower incomes or very low annual kilometres, the FBT and admin fees can erode the benefit to the point where buying with cash or a cheap car loan is comparable.
That's exactly the comparison the calculator runs: novated lease versus paying cash and versus a car loan, side by side, so you can see which wins for your numbers rather than relying on a dealer's pitch.
The EV comparison is worth running
If you're open to an electric vehicle, it's worth modelling one alongside your petrol choice. The FBT exemption on an eligible EV can swing the decision by thousands a year — sometimes enough to offset a higher purchase price entirely. Even if you ultimately choose petrol, seeing the gap makes the trade-off explicit.
This is general information, not financial or tax advice. FBT and luxury car tax thresholds are indexed and salary-packaging rules change — figures reflect FY2026-27 settings. Confirm the current treatment with your lease provider, employer and the ATO before committing.
I'm a geologist-turned-builder who got frustrated with financial calculators that hand-wave how Australian tax actually works.
Every projection on MyNextDollar runs on current ATO mechanics for FY2026-27 — Stage-3 brackets, super contribution caps and HELP thresholds.
The calculation engine is covered by 88 unit tests and 10,000 fuzz scenarios, so what you see is exactly what the rules produce — not a rough estimate.