If your employer provides you a benefit whether included in, or provided in addition to, your salary, it needs to pay Fringe Benefits Tax (FBT) on that benefit. FBT is calculated on the taxable value of the fringe benefit and is not connected to income tax.
For example, your employer may offer novated leasing as a fringe benefit to you. As this benefit is not included in your salary or wages, it is subject to FBT.
To help offset the cost of any FBT in respect of your novated lease, a portion of your post-tax salary is also contributed towards the novated lease. This is known as the Employee Contribution Method.
ECM (Employee Contribution Method)
To help offset the cost of any FBT payable on the novated lease, you can use post-tax funds from your salary. They are classed as post-tax funds because they are taken from your salary after income tax has been deducted. The ECM portion will be outlined in your quote or you can view the amount when you use our online calculator.
The ECM is a standard novated lease calculation. By using the ECM (or post-tax deduction), you reduce the taxable value of the car, which reduces the FBT payable and also helps prevent a FBT liability at the end of a FBT year (31 March).