Guides

The balloon payment on a novated lease

Checked against the official sources on 20 October 2026.

A balloon is a lump sum you pay at the end of a novated lease. Your monthly payments cover the rest of the car, plus interest. For the lease as a whole, read how a novated lease works.

What the balloon is

The financier buys the car when the lease starts. You pay the financier back each month from your salary before tax. Part of the cost is still owing when the lease ends.

That part is the residual. You pay it as one lump sum with GST on top, called the balloon. Once you pay the balloon, the car is yours.

The ATO minimum for each term

The ATO sets the lowest residual for each lease term in ATO ID 2002/1004. The minimums assume a car stays useful for 8 years. The tax rules call this its effective life.

A shorter lease leaves more of the car unpaid, so its minimum is higher. Lease providers quote at least the minimum. The calculator fills in the minimum when you pick a term.

Each percentage is of the amount financed without GST.

GST goes on top of the residual

The residual is worked out on the amount financed without GST. You buy the car from the financier at the end. That sale carries GST of 10%, and you pay it.

Balloon = residual × 1.1

So a residual of $13,236 means a balloon of $14,560. Plan for the bigger number.

How the amount financed is worked out

The amount financed is what the financier lends you. It is built up in steps.

• Car price. The price with GST and dealer delivery, before stamp duty and rego.
• Less the GST credit. Your employer claims back the GST in the price. This refund is the GST credit, so you don't borrow it.
• Capped by the car limit. The car limit is a price cap the ATO sets each year. For 2026-27 it is $69,883. So the GST credit stops at $6,353.
• Plus stamp duty. Stamp duty is a state tax on buying a car. It has no GST, and the lease pays for it.

Amount financed = price − GST credit + stamp duty

Take a $50,000 electric car in NSW. The price is under the car limit, so the GST credit is one eleventh of the price: $4,545. Stamp duty is $1,600. The amount financed is $47,055.

The balloon lowers the monthly payment

Each month you pay interest on the whole debt. You pay down only the part above the residual. A bigger residual leaves less to pay down, so the monthly payment drops.

Payment = (F − R ÷ (1 + r)ⁿ) × r ÷ (1 − (1 + r)⁻ⁿ)

• F is the amount financed.
• R is the residual, without GST.
• r is the yearly interest rate divided by 12.
• n is the number of months. You pay at the end of each month.

For the $50,000 car over 5 years at 7.5% a year, F is $47,055 and R is $13,236. Over 60 months the payment comes to $760 a month.

The balloon stays part of the deal. You still pay it at the end, with GST.

One car across every term

The table uses the same $50,000 electric car in NSW at 7.5% a year. The amount financed is $47,055 for each term. Each row uses the ATO minimum residual.

A short lease has a big balloon and a high monthly payment. A long lease costs more in total, because interest runs for more months.

These totals leave out fees, running costs and the tax you save. The calculator adds those for your own numbers.

Check the payment and balloon for your own car

Choosing a balloon above the minimum

The ATO rule sets only the lowest residual. You can ask for a higher one. Take the 5-year lease above with a 40% residual in place of 28.13%.

• Monthly payment. Drops from $760 to $683.
• Balloon with GST. Grows from $14,560 to $20,704.
• Payments plus balloon. Rise from $60,182 to $61,706.

The total goes up because more of the debt stays unpaid for longer. You pay interest on that debt every month.

The monthly payment comes out of your salary before tax. A smaller payment leaves more of your salary to be taxed. So the tax you save each month shrinks too.

A bigger balloon can suit you if you plan to sell the car at the end. It hurts if the car is then worth less than the balloon.

Your options at the end of the lease

The balloon falls due when the lease ends. You can deal with it in a few ways.

• Pay it from savings. You pay the balloon with GST and own the car. The calculator assumes this and takes the balloon from your account at the end.
• Refinance the balloon. You take out a loan for the balloon and keep the car. You repay that loan from your pay after tax, with interest.
• Sell the car or trade it in. The sale price goes toward the balloon. If the car sells for less, you pay the gap. If it sells for more, the rest is yours.
• Re-lease the car. Some providers let you start a new novated lease on the same car. The new lease pays out the balloon and you keep driving.

Ask your provider what they offer before you sign. Ask what each one costs in fees.

What the calculator leaves out

Fringe benefits tax (FBT) can apply to a car on a novated lease. It is worked out from the car's base value. That is the price with GST, without stamp duty and rego.

The base value drops by a third once the car has been held for 4 years. The drop starts in the next FBT year. The FBT year runs from 1 April to 31 March.

The calculator keeps the full base value for each year. On a 5-year lease that pays FBT, the real FBT near the end may be lower than shown.

An electric car that qualifies for the EV FBT exemption pays no FBT. For that car the drop makes no difference.

Try your own numbers in the calculator