We have assembled an extensive range of answers to the questions that our customers ask when it comes to novated leasing. Scroll through the list of our novated leasing FAQs we are confident you will find most of the answers to your questions.
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- NOVATED LEASING 101
- NOVATED LEASING ELECTRIC VEHICLES
- NOVATED LEASING IN GREATER DETAIL
- NOVATED LEASING ON THE ROAD
The novated lease residual for your novated lease is determined by the ATO residual value percentage. For instance if your novated lease is 3 years (36 months) then the residual value will be 46.88% of the price of the new or used vehicle.
You will have to talk to your organisation’s HR Department but as long as you are drawing a salary you can sacrifice part of your salary for expenses such as a novated lease.
If you are planning to retire, hopefully we can set up your lease to end as the final salary goes into your bank account.
You can then choose to either pay off the residual and keep the car or sell the car and keep any tax free profit on the sale of the car.
If you are looking to retire, it might be an idea to flag this with our consultant prior to finalising your novated lease.
This will depend on if you are moving overseas short term or long term.
As novated leasing is only in Australia, if you are leaving long term, you will need to terminate and payout your novated lease. You can payout the novated lease by selling your car. Any shortfall between the lease payout and car sale price will need to be paid by you. if the sale price is higher than the lease payout then you get to keep the profit on sale.
If you are leaving short term and you are remaining in the employment of the same organisation they will continue to pay your novated lease, then your lease will be not be affected.
Simply put us in touch with the person who deals with novated leasing in your new company and we will take it from there! So long as your new employer allows novated leasing, we can transfer the novated lease to your new employer so you can enjoy the income tax and GST benefits.
Leaving your job is the same as being made redundant in terms of your novated lease. Please note that loan protection insurance does not provide cover for voluntarily leaving your job.
The novated lease is no longer salary packaged and it becomes a finance lease. There are no tax benefits, salary deductions, no fuel cards etc.
You now have two options. Firstly, you can sell the car and payout the lease. Secondly, you can make payments directly to the finance company until you secure another job. Once you start your new job, we can set up a new novated agreement with your new employer and all the benefits associated with your novated lease will resume with the new employer.
If you took out Loan Protection Insurance at the time of commencing the novated lease, then your lease will have some cover for the costs of the novated lease during your period of unemployment. The extent of cover will depend upon your insurance policy. If you are interested in Loan Protection Insurance please discuss this option with your consultant prior to undertaking your novated lease.
If you travel over 30,000 kms every year, you may be able to apply a high kilometre residual on your car. You will however need to demonstrate in this circumstance that the vehicle under a novated lease is being used for business.
You will own the vehicle and as a result you will no longer be eligible for the tax benefits associated with a novated lease.
Just contact us at One Car Group and we will get a quote from your financier to payout your lease. You can payout the lease from the proceeds of sale of your car. We can assist you with setting up a new novated lease salary package your new car.
The Australian Tax Office approved residual values as a percentage of the price of the vehicle are as follows:
12 month lease – 65.63%
24 month lease – 56.25%
36 month lease – 46.88%
48 month lease – 37.50%
60 month lease – 28.13%
When you enter into a novated lease, it’s essentially “renting” your car from a finance company and your repayments reduce the amount owing on the car. However, the ATO will only permit you to pay down a certain amount of the price of the car. The amount remaining at the end of the lease term (after you’ve paid as much as you’re allowed) is the residual.
If your novated lease is managed properly, you can avoid paying FBT by deducting some of the monthly expenses out of your post-tax salary.
In simple terms, Fringe Benefit Tax (FBT) is a tax imposed on non-cash benefits received by employees outside their salary. Further information can be found of the Australia Tax Office website here.
Most cars do not attract luxury car tax. If you are purchasing an expensive new vehicle then it may result in the price of the car including luxury car tax. If this is the case then the amount of GST the financier can claim back on your car will be limited and as such the repayments on the finance component of the lease will be higher than if the car had no luxury car tax included in the price.
When salary packaging a high priced car you may also need to pay from your salary deductions a Luxury Car Allowance. This is an amount your employer will need to collect to offset the cost to them of you electing to enter into a novated lease on an expensive vehicle.
Luxury Car Tax and the Luxury Car Allowance topics are quite technical and if you have further questions we highly recommend you speak with a registered tax accountant prior to entering into a novated lease.
The finance company considers your credit rating as part of the overall application.
You can lease your car from 12 – 60 months (1 to 5 years).
The interest rate and repayments are calculated and set at the begin of the lease and stay the same for the term of the novated lease.
Typically, new electric vehicle (EV) purchases come with a basic charger that can be connected to a standard household power outlet. However, for those looking for a quicker and more advanced charging experience, there are faster chargers available for an additional cost. These upgraded charging units offer quicker charging times and added features such as monitoring and recharging capabilities.
The cost of these advanced charging units can range from $1,000 to $3,000, and they are not typically included as part of a novated lease package. While these chargers do come at an extra cost, they offer benefits such as faster charging times and more advanced monitoring capabilities, making them a worthwhile investment for those looking to optimise their EV charging experience.
Note: The capital cost of the home charging / portal charging equipment is considered a capital cost an subject to fringe benefits tax. See ATO website for further details
EV charging stations are being rolled out across Australia by various organisations.
You can search online via the Electric Vehicle Council Australian EV Charger Map
Here are links to some of the larger providers, they all operate via downloading an App:
- ChargeFox – Australia’s largest EV charging network
- Evie – operates in QLD, NSW, VIC, SA and TAS
- Jolt – operates in Sydney Melbourne and Adelaide
Tesla owners can locate their nearest charging stations from in the vehicle.
If you have budgeted electricity into your novated lease running costs then claim back the cost by lodging a receipt / tax invoice via the driver portal and we will reimburse the cost to your nominated bank account.
The Electric Vehicle Discount Policy is a government initiative implemented at the federal level with the aim of lowering the purchase cost of electric vehicles (EVs) and encouraging greater adoption among Australians.
This policy encompasses two significant discounts. Firstly, it eliminates the 5% import tax on eligible EVs. It is worth noting that many EVs are already exempt from this tax due to their importation from countries with which Australia has a Fair Trade Agreement.
The second and particularly noteworthy aspect of this policy is the full exemption of EVs acquired through a novated lease from Fringe Benefits Tax (FBT). This change is particularly exciting as it encourages individuals to take up EVs under a novated lease arrangement without incurring any FBT obligations.
If you have a novated lease on an eligible EV or PHEV and all the payroll deductions are taken from your pre-tax salary to run the vehicle your employer needs to report such benefit on the Income Tax Summary that is lodged with the ATO and visible in the ATO portal.
See further detail on the ATO website at this link
The Employee Contribution Method (ECM) is designed to offset any potential liability for Fringe Benefits Tax (FBT) on your novated lease. By making both after-tax and pre-tax contributions through your salary, you can reduce the taxable value of your car fringe benefit to NIL, thereby eliminating and FBT liability by the end of the FBT year (which ends on 31 March).
The FBT Exempt Method allows for the exemption of FBT payments on eligible electric vehicles up to the Luxury Car Tax threshold of $84,916 (2022-23 tax year). With this method, all payments for the novated lease are deducted from your pre-tax salary. Unlike the ECM, there is no post-tax component if the Luxury Car Tax Value is below the threshold. However, employers are required to include FBT-exempt electric cars as a reportable fringe benefit on an employee’s payment summary.
We recommend you seek independent financial advice on what impact this could have to your personal circumstances, including means-tested government benefits.
Plug in Hybrid Electric Vehicles (PHEVs) are eligible for the FBT exemption up until 1 April 2025.
After 1 April 2025 newly purchased PHEVs will not be eligible to the FBT exemption.
However, those on pre-existing leases are still entitled to the FBT exemption up until the end of their lease, so long as a commitment is made before 1 April 2025.
The ATO has published guidance on the eligibility of EVs and PHEVs under the electric cars FBT exemption – see this link
In summary the eligibility is as follows:
- the car is a zero or low emissions vehicle
- the first time the car is held and used is on or after 1 July 2022
- luxury car tax has never been payable on the importation of the car
- the car is used by a current employee or their associates (such as family members)
The maximum value of the EV or PHEV for FBT exemption is determined by the Luxury Car Tax threshold which is subject to change, published by the ATO:
- From 1 July 2022 to 30 June 2023 = $84,916
- From 1 July 2023 to 30 June 2024 = $89,332
The value of the vehicle includes options and accessories but excludes on road costs such as CTP, registration and state / territory stamp duties.
Electricity is an allowable item to package in your novated lease budgets. If charging at home you will need to have installed a separate smart meter so the costs can be captured for charging your EV / PHEV. The report from the smart meter can be used to claim back the electricity cost against you novated lease budgets.
When you charge your EV on a Tesla or other third party charging station they will provide a receipt which can be used to claim back the cost via the driver portal.
Electric vehicles do require servicing. They have fewer moving parts and so the items that require attention is fewer than a petrol or diesel vehicle. Items such as checking brakes, tyres and safety inspections are similar to that as any other vehicle. Each manufacturer publishes service schedules which need to be followed to ensure the optimum performance of your EV.
The primary benefit of novated leasing is the tax benefits so therefore, a percentage or two on the interest rate will have little impact.
The largest cost of car ownership is the depreciation – the amount that the car falls in value over time. So what is more important to cheaper car ownership is to select a car that holds is value better than most in the market and to deduct as much of the costs of ownership of the car before income tax.
Use our calculator to see how you can benefit.
The cost of running an electric vehicle (EV) can vary depending on factors such as the cost of electricity in your area, the type of EV you own, and your driving habits.
Generally speaking, operating costs for an electric vehicle are significantly lower compared to traditional petrol powered vehicles. This is because electric motors are more efficient than internal combustion engines, and electricity is often cheaper than petrol.
Both types of vehicles offer unique advantages. For those residing in inner city areas where trips are typically short in duration and distance, a PHEV may be the ideal option. These vehicles can largely rely on their electric power without the need for frequent access to the motor, making them well-suited for urban settings.
PHEVs also have an advantage for longer trips where charging infrastructure may be limited. In such situations, the vehicle can rely solely on its engine, ensuring that it remains operational even when charging options are scarce.
On the other hand, electric vehicles offer the benefit of not requiring fuel, which can lead to significant cost savings. Additionally, since these vehicles have fewer moving parts, they generally require less maintenance. However, it’s important to note that regular charging is necessary, so some pre-planning is required for longer trips.
Hybrid vehicles, such as the Toyota Prius, have been around for a couple of decades. Hybrids do not plug in to charge the electric motor and as such are not considered FBT exempt under the electric vehicle legislation introduced from 1 July 2022.
PHEVs have electric and petrol motor components. The electric motor needs to be changed to propel the vehicle, they have short range coverage, normally up to 100 kms. The petrol motor is a conventional internal combustion engine.
An electric vehicle (aka EV) is a vehicle that is propelled by electricity which is stored in the vehicles onboard batteries. The batteries are recharged by plugging into a charger.
- To change your PIN:
– Visit a BP site with an EFTPOS terminal and request to change your PIN
– The service station attendant will ask you to enter your existing PIN number
– You will then be prompted to enter your new 4-digit PIN number
– Confirm the new PIN number a second time
– Your new PIN number will be ready to use
As it’s only the finance that is fixed during the term of the lease, you can increase or decrease your kilometres at any time. With a change in kilometres we will adjust your budgets for fuel, servicing, tyres etc to align with the new kilometres included in your lease.
If you have chosen Roadside Assistance with One Car Group you have access to assistance 24/7 by calling 1800 225 111.
You can use your own comprehensive insurance provider. As a matter of fact we recommend you do use your own provider as they are likely to provide you a great price on the annual premium. Please note that we reimburse annual comprehensive insurance premiums via a claim lodged by you or if you provide us the insurance policy / invoice two weeks in advance of its due date.
When we are estimating your budgets, we always add a little extra to cover any unexpected costs associated with running your car. We prefer to add a little extra rather than you experiencing a “nasty surprise”. If you do need an increase in your budget to cover a surprise expense we can make a one off adjustment to your budgets and salary deductions to cater for such an expense.
As your weekly, fortnightly or monthly budgets represents an average cost, there will be times when you under spend and then over spend your budgets. Once you reach the end of your lease if there is a surplus in the budget the funds are returned to your employer and the appropriate tax deductions made and the net balance returned to you via a salary payment.
If there is consistent under spending against your budgets we may need to reduce your future budgets and therefore reduce you future salary deductions.
As with most things, there maybe months where you over spend budgets just as there will be months when you under spend budgets. So long as you don’t overspend your total budgets there is nothing we need to do.
If you are consistently overspending we will have to increase your budgets and therefore increase your salary deductions. Obviously, we will discuss any proposed budget changes with you prior to implementing any adjustments. In most cases our customers do not require any changes to their budgets over the term of their leases.
Technically you can just enter into a novated lease finance contract without the running costs. One Car Group can assist with arranging the novated lease finance but then the payment of the lease installments will be between your employer, yourself and the finance company. Of course then you won’t get the income tax and GST benefits associated with salary packaging the $’000 of running costs you will incur.
The income tax and GST benefits are for all running costs associated with your car which includes fuel, servicing and insurance etc. So to maximise your tax and GST savings we include all the running costs allowed by the ATO.
When you have selected your car, we know how much it costs and that will determine your finance repayment over the term of the lease. The same with your insurance. We then ascertain how many kilometres you may drive every year and based on you car we can determine – how much fuel you’ll need, servicing & maintenance required, replacement tyres, registration & CTP, roadside assistance and car washes and this allows us to estimate how much it’s going to cost to run your vehicle. Lastly, we allow for unexpected costs which can happen from time to time.
And that’s how we determine the total running costs for your car during the lease which we divide by the number of months your novated lease contract runs (12 to 60 months).
At the end of the lease, you have several options. Firstly, you can sell your car and pay off the residual which will allow you to lease another car. Also, if you sell your existing car for more than the residual you keep the tax free profit. The second option is to extend your lease – allowing you to keep your existing car longer.
Lastly, you can pay off the residual and keep your existing car. This would mostly be of benefit to those that are no longer employed or about to retire.
Using Ampol Accredited Suppliers
When booking your car in for service advise the provider that your vehicle is covered by the Ampol card. When dropping the vehicle in for service leave the Ampol card with the service centre. prior to commencing any servicing and repairs the service centre will make contact with the Ampol maintenance team and they will pre-approve any servicing and repair costs to ensure you get access to great pricing and are not over charged or up sold by the service centre. The costs will be charged to your Ampol card and will be charged against your novated lease budgets.
Booking Online
If you would prefer to book online, Ampol has partnered with Auto Guru to tap into an even bigger network of suppliers. Go to this LINK and make a booking that will be charged to your Ampol card.
If you would prefer to use a service provider not registered with the Ampol or Auto Guru network then please make payment and lodge a claim for reimbursement with One Car Group.
One Car Group can package your lease payments, fuel, registration & CTP, insurance, servicing, maintenance, tyres, roadside assistance, motor club membership and car washes. We will be tailor what car costs are packaged for your Novate One lease to match your personal requirements.
A difficult question and is really a personal choice that comes down to balance the pros and cons of new versus used.
In the case of a new vehicle is has never been owned or driven before and comes with a full manufacturers warranty (3 to 7 years). A new vehicle has the latest in safety features and the creature comforts. The costs of servicing and maintaining the vehicle are normally lower than a used vehicle. The downside is that it is a more expensive vehicle than a used one and so the repayment will be higher.
A used vehicle is cheaper to buy and finance but may not have a manufacturer warranty and the costs to keep the vehicle serviced and maintained is likely to be higher than a new car. If you want to choose a used vehicle we would suggest a near new vehicle with low kilometres.
The car is registered in your name for the term of the lease. The car is owned by the bank or finance company. When you payout the residual value of the lease at the end of the term then the car is owned by you.
Steps, steps, we love steps …
- The first step is phone consultation. This will give you the opportunity to discuss with a consultant what car you would like and estimate running costs.
- When you decide to go ahead with a Novate One lease, we submit an application for finance along with a privacy consent, payslip and your drivers licence.
- Running in parallel we will be looking at sourcing you a car OR you can do the shopping if you prefer.
- We contact your employer to confirm all your details. If your employer doesn’t have an agreement with us, we will set one up.
- Once the full details of the car are known we will then be in contact to complete the documentation and submit the finance for settlement.
- When the finance has “settled” and the car is available – it’s all yours!!
- We will post out a welcome letter and fuel cards to provide you more information to make your Novate One lease a smooth running process
- Your employer will receive a payroll advice from us and then salary deductions will commence
Best thing with all these steps is that we will do most of the work for you.
Anyone earning a salary and paying tax through PAYG system qualifies for a novated lease. Whether you drive 20 or 200 kilometres per week, use the car for work or own the vehicle you can still benefit from the savings associated with a novated lease.
Here is the process in as few words as we can put it……
- Your employer confirms that you are able to salary package a novated lease
- You choose a car – new or used. Maximum age at end of the lease is 10 years.
- We prepare a proposal of the costs of finance and running costs for your choice of lease term and kilometres. The proposal will outline the inclusions, costs and tax savings.
- Apply for finance for your chosen term (12 to 60 months).
- Once finance is approved and the car is ready for delivery we generate the paperwork and you and your employer review and sign
- We submit the paperwork to the financier and they “settle” the finance and pay the vehicle supplier
- We send a payroll advice to your employer and they commence deductions from your salary
- We send you a login to our online system so you can track your spending
- We post you a welcome pack with fuel cards outlining in greater detail how everything works
- You enjoy your new vehicle and the tax savings through Novate One
When you choose to salary sacrifice the cost of your car, you pay a part of the overall costs of the lease finance and the running costs of the car before your income tax is calculated. As this salary deduction reduces your taxable income you pay a lower amount of income tax. Any pre-tax deductions exclude GST as your employer can claim back the GST.
You can use our Novate One calculator to estimate your savings. When you are ready speak with us on 1300 616 993 and we can tailor a proposal to your personal circumstances.
One Car Group will provide you with a fuel card for Ampol and BP which is linked to the budgets you have set aside for fuel. If you have can’t find either of these service stations, fill up at a convenient service station and we will reimburse you the cost. Keep the fuel receipt and lodge a claim with us online.
If you draw down on your mortgage to pay for a car you are unable to take advantage of the tax breaks that come with novated leasing.
You can’t use your own finance if you want to take advantage of the tax breaks from novated leasing.
So long a you pay income tax, you can benefit from novated leasing.
In the past the fewer kilometres travelled with a novated lease the higher you were taxed, but that has all changed. If you drive only 100 kilometres per week you can still benefit from a novated lease.
You don’t have to use your car for work. If you do use your car for work, there is another method with novated leasing that will provide you with even more tax benefits.
No. The Australian Tax Office does not allow for salary packaging tolls and parking fines.
No. You can pay for petrol or diesel with the fuel cards provided by One Car Group.
A novated lease (we call Novate One) is an easy and tax-effective way of running a car. With one monthly payment covering not only the lease finance cost but also the running costs of your vehicle such as fuel, registration & CTP, insurance, servicing, tyres, roadside assistance and even car washes.
Technically you can salary package a motor bike but not with One Car Group.
You cannot salary package a boat but we can help you with finance options.
If you are an employed by the business (i.e. draw a salary) you can salary package a car.
If you don’t draw a salary from the business we can assist with our Chattel One fully budgeted product which has all the convenience of a novated lease but designed for small businesses.
Of course you can source a new or used car. Please remember that if you choose to purchase a used car from a private seller you will not get the benefit of the GST saving on the financing of the car.
This is called a sale and lease back. We organise a finance company to buy the car from you and then lease it back to you. The car remains registered to you.
This is a great way to stay in the same car and take full advantage of the tax breaks associated with novated leasing.
You can salary package a used car so long as it is not older than 10 years at the end of the lease term.
You can have as many novated leases as you like so long as you have the salary to cover the cost of novated leases.
The CTP and registration renewals will be posted to you by the insurer and state registry authority 4 to 6 weeks prior to the sue date. You can either make payment and seek reimbursement from One Car Group or email us the CTP and registration papers and we will arrange for payment. if you wish for us to make payment please email One Car Group the CTP and registration renewal paperwork 2 weeks prior to the due date. Please note that it is your responsibility at all times to keep your vehicle registered.
Not Registered for Tax & Accounting Advice
We have compiled the above FAQs to assist you in better understanding how novated leasing and salary packaging works. We are not registered for tax and accounting advice and so the responses above are provided on the basis of our understanding and are NOT income tax, GST or accounting advice. We do recommend you speak with a qualified and registered professional to seek further guidance on novated leasing and salary packaging.