Every novated lease ends with a residual payment. It exists by design: lease repayments only cover part of the car's value, and the ATO prescribes the minimum slice that must remain.
ATO minimum residual values
From ATO ID 2002/1004, as a percentage of the amount financed:
| Lease term | Minimum residual | On $50,000 financed | Payout incl. GST |
|---|---|---|---|
| 1 year | 65.63% | $32,815 | $36,097 |
| 2 years | 56.25% | $28,125 | $30,938 |
| 3 years | 46.88% | $23,440 | $25,784 |
| 4 years | 37.50% | $18,750 | $20,625 |
| 5 years | 28.13% | $14,065 | $15,472 |
These are minimums: a lessor can set the residual higher (lower weekly payments' mirror image is a bigger balloon), but not lower. On a typical 3-year lease with $50,000 financed, you'll owe at least $23,440 at the end, which becomes about $25,784 once GST is added to the payout.
Balloon payments by car price and lease term
Quotes start from the drive-away price, not the amount financed. The financier claims the GST in the price as a credit, capped at $6,353 in 2026-27 (one eleventh of the $69,883 car limit), so the amount financed is the price less that credit. Minimum balloon, then the payout including GST if you keep the car:
| Lease term | $40,000 car | $60,000 car | $80,000 car |
|---|---|---|---|
| 1 year | $23,865 ($26,252 incl. GST) | $35,798 ($39,378 incl. GST) | $48,335 ($53,168 incl. GST) |
| 2 years | $20,455 ($22,500 incl. GST) | $30,682 ($33,750 incl. GST) | $41,426 ($45,569 incl. GST) |
| 3 years | $17,047 ($18,752 incl. GST) | $25,571 ($28,128 incl. GST) | $34,526 ($37,978 incl. GST) |
| 4 years | $13,636 ($15,000 incl. GST) | $20,455 ($22,500 incl. GST) | $27,618 ($30,379 incl. GST) |
| 5 years | $10,229 ($11,252 incl. GST) | $15,344 ($16,878 incl. GST) | $20,717 ($22,789 incl. GST) |
| Amount financed | $36,364 | $54,545 | $73,647 |
A $60,000 car on a 3-year lease leaves a balloon of at least $25,571, or $28,128 to own it. A 1-year lease on an $80,000 car leaves $53,168 to pay out, two thirds of the price. Even the longest term on the cheapest car leaves $11,252. The $80,000 column finances more than a straight 10/11 of the price because the GST credit cap applies above $69,883.
Why the minimums exist
If residuals could be $1, a novated lease would just be buying a car out of pre-tax salary, and the tax concessions aren't meant to stretch that far. The prescribed percentages roughly track how much value a car is assumed to retain, keeping the lease a genuine lease. That's also why shorter terms have larger residuals: a 1-year-old car has simply lost less value.
Your three options at end of lease
- Pay it out. Pay the residual plus GST and own the car outright. This is the number to budget for from day one.
- Refinance or re-lease. Roll the residual into a new novated lease. Common, convenient, and worth re-running the numbers on rather than rolling by default: fees and interest apply to the new lease too.
- Sell or trade the car. Clear the residual from the proceeds. If the car is worth more than the residual, the surplus is generally yours tax-free; if less, you cover the gap.
Comparing quotes with the residual included
The residual is the main way lease quotes look cheaper than they are: a weekly payment that excludes the balloon isn't comparable with a car loan payment that repays the whole car. Our novated lease calculator includes the residual plus GST in every total, next to the loan and cash alternatives, and prefills the ATO minimum for your chosen term. For the broader decision, see is a novated lease worth it?, with worked five-year totals.
Frequently asked questions
Do I pay GST on the residual?
Yes, if you pay it out to keep the car (see the payout column above). Quotes usually print the residual excluding GST, so check which number you are looking at.
What happens if the car is worth more or less than the residual?
A surplus is generally yours tax-free for a personal-use car; a shortfall is yours to cover. EVs have had volatile resale values, which makes this gap risk worth taking seriously.
Can I just re-lease the residual?
Usually yes, and it restarts the cycle on the smaller amount. For EVs, also check how the FBT exemption rules treat a new commitment at that time.
Sources
Figures on this page come from the following primary sources. The date is when we last checked the page against the source.
- ATO ID 2002/1004: minimum residual values for leased cars (ATO), checked 27 July 2026.
- Car thresholds from 1 July (ATO), checked 27 July 2026.
- Fringe benefits tax rates and thresholds (ATO), checked 25 August 2026.
Related
Novated lease calculator: your full lease cost with the residual and GST included. Novated lease vs car loan: the head-to-head on the same car. Novated lease FBT: how fringe benefits tax and the employee contribution method work.
Figures current as at 5 October 2026. Residual percentages verified against ATO ID 2002/1004; see our methodology. General information only, not financial advice.