📌 Summary in Plain English

Pre-Tax Deduction

Lease payments come out before tax is calculated, reducing the employee's taxable income. The higher the employee's marginal tax rate, the greater the saving. Includes the LCC for luxury cars.

Post-Tax ECM Contribution

A post-tax payment equal to 20% of the car's GST-exclusive base value (the FBT taxable value under the Statutory Formula). It eliminates what would otherwise be a significant FBT bill on the employer. Note: this is based on the car's value — not the running costs.

GST Recovery

The employer claims 1/11th of all running costs and (up to the LCT threshold) the car purchase as GST credits — reducing what gets charged to the employee's lease budget.

Luxury Car Tax (LCT)

A 33% tax on the car value above $80,567, charged by the dealer and baked into the purchase price. It inflates the amount financed, increasing the employee's lease repayments.

Luxury Car Charge (LCC)

An additional pre-tax deduction applied when a car exceeds the LCT threshold. It represents the GST Input Tax Credit the employer cannot recover on the above-threshold portion. The LCC is charged pre-tax — so the employee still gets a tax benefit on it — but it does increase the total pre-tax deduction.

LCT threshold: $80,567 (standard) / $91,387 (fuel-efficient vehicles) — 2025–26.

⚠️Important Disclaimer

This guide is intended as a general educational overview only and does not constitute financial, taxation, or legal advice. The information has been prepared for illustrative purposes for Australian employees in the 2025–26 financial year and is based on legislation and ATO guidelines current at the time of preparation.

Tax outcomes will vary depending on individual circumstances including income level, car type, lease structure, days of private use, employer policies, and applicable state charges. All figures shown in examples and the interactive calculator are estimates only and should not be relied upon as an accurate reflection of any individual's tax position.

Before entering into a novated lease arrangement, employees are strongly encouraged to seek independent advice from a registered tax adviser, financial planner, or qualified novated lease specialist who can assess their personal circumstances.

📅 Current as at 2025–26 financial year📋 FBT statutory rate: 20% · FBT rate: 47%ℹ️ General advice only — not a substitute for professional advice