Compulsory HECS/HELP repayments aren't calculated on your taxable income. They're calculated on repayment income: taxable income plus reportable fringe benefits, reportable super contributions, net investment losses and exempt foreign employment income. A novated lease can change two of those at once: it lowers taxable income, and it can add a large reportable fringe benefits amount (RFBA) on top. Whether your HECS repayment goes down, up, or way up depends entirely on which effect wins.
Where the RFBA comes from
When the fringe benefits you receive in an FBT year (1 April – 31 March) have a total taxable value over $2,000, your employer must report the grossed-up amount on your income statement. For a car, the taxable value under the statutory formula is 20% of its base value; the gross-up multiplier for reporting is 1.8868. So a $50,000 car generates a taxable value of $10,000 and an RFBA of about $18,868 a year. You pay no income tax on the RFBA itself, but HECS, the Medicare levy surcharge, Division 293 and family assistance income tests all count it.
Petrol and hybrid leases: ECM usually makes this a non-issue
For cars that attract FBT, almost every novated lease is structured with the employee contribution method: enough of the running cost is paid from your after-tax salary to cancel the FBT taxable value dollar for dollar. Taxable value zero means no FBT for your employer and no RFBA for you, so your repayment income is just your (reduced) taxable income, and your HECS repayment typically falls slightly. If your quote uses ECM, the HECS story is boring, which is how you want it.
Exempt EVs: no FBT, but the RFBA survives
The EV FBT exemption is what makes electric novated leases so attractive: the whole lease can be packaged pre-tax with no FBT and no need for ECM. But the exemption doesn't remove the reporting obligation. The notional taxable value is still calculated and grossed up, and the resulting RFBA lands on your income statement. There's no FBT liability for after-tax contributions to offset, so ECM can't make an exempt EV's RFBA go away.
Worked example (FY 2026–27)
| No lease | EV lease (exempt) | Petrol lease (ECM) | |
|---|---|---|---|
| Salary | $100,000 | $100,000 | $100,000 |
| Taxable income | $100,000 | $88,000 | $88,000 |
| RFBA | – | $18,868 | $0 (ECM offsets it) |
| HECS repayment income | $100,000 | $106,868 | $88,000 |
| Compulsory HECS repayment | $4,571 | $5,601 | $2,771 |
Assumptions: $100,000 salary, $50,000 car packaged $12,000 a year pre-tax, statutory formula, FY 2026–27 HECS thresholds, petrol-lease ECM contribution equal to the taxable value (paid after tax, not shown in the take-home comparison). The EV lease pushes repayment income to $106,868, about $1,030 a year more HECS than no lease at all, while the ECM petrol lease trims the repayment. The EV's tax savings usually still dominate, but a quote that ignores HECS won't mention the extra $1,030. It also delays your payoff date, model it with the HECS repayment calculator, which takes repayment income directly.
How to check your own numbers
- Ask the leasing company for the car's FBT base value and the RFBA estimate for a full FBT year: they have both.
- Repayment income = projected taxable income (after the pre-tax deductions) + RFBA + any reportable super contributions and investment losses.
- Feed that into the HECS calculator's repayment-income field and compare against your no-lease salary.
- If you're near the top threshold, watch the flat-rate switchover: above $186,051 the repayment becomes 10% of your entire repayment income, an RFBA can push you across it.
Frequently asked questions
Does the RFBA also affect anything besides HECS?
Yes. Besides the income tests listed above, the same grossed-up amount counts in child support assessments. A lease that creates an $18,000+ RFBA can move several of these at once.
Sources
Figures on this page come from the following primary sources. The date is when we last checked the page against the source.
- Reportable fringe benefits for employees (ATO), checked 25 August 2026.
- Study and training support loans rates and repayment thresholds (ATO), checked 27 July 2026.
- Electric cars exemption (ATO), checked 5 October 2026.
Related
Novated lease calculator: the full lease-vs-loan-vs-cash comparison, balloon included. What counts as HECS repayment income: all five components explained. The EV FBT exemption: eligibility, the LCT price cap and the announced phase-down.
Figures current as at 25 August 2026. RFBA rules verified against the ATO's reportable fringe benefits guidance (dated 5 June 2026); HECS and FBT figures per our methodology. General information only, not financial advice.