Novated Car Leasing: Benefits You Need to Know

Key Highlights

• With a novated lease, you can save on tax because you pay for the lease and running costs from your pay before deductions are taken out.
• In Australia, you get to pick the new car or used car you want through a novated leasing deal.
• You also get lower running costs, as there is no GST on things like registration, fuel, and fixing your car.
• If you have an electric car under the luxury car tax threshold, you can avoid paying fringe benefits tax (FBT) on it.
• The lease payments are set, so it’s easier for you to plan your budget during the term. Different options are there to fit what you want.
• At the end of your lease, you can pay the leftover amount or sell the car for its market value.

Introduction

Are you looking for a smarter way to pay for your next car? You might want to try a novated lease. This option is quite popular in Australia because it is easy to use and comes with tax advantages. With novated leasing, you can pay for all your car costs from your pre-tax salary. You get to do this for both new and used cars, which helps you get significant savings on tax, GST, and running costs. No matter if you want an electric vehicle or a petrol car, a novated lease gives you flexibility and helps you at every step of the way.

What is Novated Car Leasing?

Novated car leasing is a way to make owning a car easier and can help you save on tax. In a novated lease, your lease payments and running costs are taken from your pay before tax. Because of this, your taxable income goes down, so you get to keep more of your money for other things. It does not matter if you buy a new car, want to use your current car, or choose a used one. A novated lease fits well with what you may want for your money in the future.

In a novated leasing deal, there are three main people involved: you, your boss, and the lease provider. Your employer will take the agreed lease payments out of your wage and send them straight to the leasing company. This simple setup lets you see where your money goes, and it removes the stress of getting a normal car loan. A novated lease also gives you the choice of what to do with your car at the end of the lease.

How Does a Novated Lease Work in Australia?

A novated lease in Australia is easy to understand. In this three-way agreement, your employer looks after the lease payments. They take these payments from your pre-tax salary. So, you can save money on income tax every step of the way. Your employer keeps paying the lease as long as you keep working for them. This makes things much simpler for you.

If you get a new employer, the novated lease arrangement can move over to your next job. This helps the lease fit in with your work and life changes. Also, the novated lease has fixed lease payments. These payments usually last from one to five years. That way, you know what your costs will be and there are no surprise changes.

At the end of the lease, you have more than one option. You might decide to pay the leftover amount to buy your car outright, or you can sell it and try to get its market value. There is also the choice to start a new novated lease. Each option has its own benefits.

Key Benefits of Novated Car Leasing

Novated car leasing can help you save money, which makes it good for many workers. One big reason is the tax savings you get through salary packaging. Lease payments and running costs are taken out before your pay gets taxed. This lowers your taxable income. You end up with more money, both right now and later on.

Also, novated leasing lets you buy a car, pay for registration, and cover maintenance costs without having to pay GST on those. When you add up these savings and the deductions, it makes owning a car much easier and more affordable with a novated lease.

Tax Savings and Salary Packaging Advantages

Tax savings are a standout feature of novated leasing, especially for individuals aiming to minimise their tax bill. With payments deducted from your pre-tax salary, your taxable income shrinks, translating into reduced income tax and more take-home pay. This advantage particularly benefits those in the highest marginal tax rate, as the savings scale with income.

Additional savings occur when you incorporate running costs—fuel, servicing, roadside assistance—into the salary packaging arrangement, driving down your taxable amount even further. Employees who leverage novated leasing often see significant savings compared to other vehicle financing options.

Aspect	Details
Income Tax Savings	Lease and running costs paid pre-tax reduce taxable income.
Fringe Benefits Tax (FBT)	Electric vehicles under the luxury car tax threshold are exempt from FBT.
Lesser Tax Bill	Combining costs into pre-tax payments lowers annual tax expenditures.

Flexible salary packaging allows employees to enjoy consistent economic relief while managing their car finances efficiently.

No GST on Vehicle Purchase and Running Costs

Novated leasing helps you save a lot because of its GST benefits. You do not have to pay GST on the car’s purchase price or on the running costs you face each day. This means things like registration, roadside assistance, and tyres do not have GST, and that can save you thousands.

Key advantages include:

• You can buy a vehicle for under $69,674 without paying GST, or take up to $6,334 off the GST if your car costs more.
• There are rebates for electric vehicles if the car is below $91,387.
• You can get input tax credits for some things, like registration and repairs.
• You do not have to pay stamp duty or GST when you pay for car servicing.

On top of these savings, novated leasing makes it easy to know what your costs will be. With it, employees get good value and can plan for their costs, with no surprise GST charges.

Conclusion

To sum up, novated car leasing in Australia gives you some big benefits. You can have more financial flexibility and enjoy your time on the road. Some great points include tax savings, salary packaging perks, and you do not pay GST on the car and running costs. This way of leasing may be a good choice for many people. If you learn about how novated leases work and look at your eligibility, you can make a good choice for your own lifestyle and budget. If you want to see how this could help you, contact us for a free chat. We will help you look at this option and pick the right vehicle for you.

Frequently Asked Questions

Can I choose any car with a novated lease?

Yes, with a novated lease, you usually get to pick any car that works for you and your budget. But, you need to check that the car meets your employer’s novated lease rules. The vehicle also has to fit the lease guidelines set by the company, helping you with a novated lease.

How do I get started with a novated lease?

To get started with a novated lease, you should talk to your employer first. Make sure you know their rules about a novated lease. Next, choose a car that works best for you. After that, reach out to a leasing company in order to set up the deal. Before you sign anything, look over the money details and what you can get from a novated lease. This will help you make a good choice.

Who is Eligible for a Novated Lease?

To be eligible for a novated lease, people must usually work full-time for a company that offers this option. They also need to earn more than a set amount. The novated lease must be set up through the employer, so it is important for employees to talk to their HR teams about this.