TopToolsAiEstimate the running costs and potential tax savings of a novated lease on a car in Australia, based on the vehicle price and annual kilometres. A AUD 40,000 vehicle leased over 5 years through a novated arrangement can reduce taxable income enough to offset a meaningful portion of the running costs, though the actual saving depends heavily on the employee's marginal tax rate and annual kilometres driven.
Last updated: 1 Sep 2026
Frequently asked questions
What is a novated lease exactly?
It's an arrangement where your employer pays for your car lease and running costs out of your pre-tax salary, which can reduce your taxable income.
Does the potential saving apply to everyone?
Tax savings depend on your income bracket and how much of the lease is paid pre-tax — higher earners often see bigger relative benefits.
What happens if I change jobs?
A novated lease is tied to your employer — if you leave, the arrangement typically ends and you'd need to either pay the lease directly or arrange a new novation with your new employer.
Does this include running costs like fuel and insurance?
Many novated lease packages bundle running costs into the pre-tax deduction — check whether your quote includes just the lease or the full package.
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