Novated Lease Benefits for Employees – Save Money & Drive Smarter
Novated Lease Benefits for Employees – Save Money & Drive Smarter
A novated lease is one of the most tax-effective and convenient ways for employees to finance a vehicle. It allows you to package your car payments, running costs, and maintenance into a single payment from your salary using a mix of pre-tax and post-tax income.
How a Novated Lease Works for Employees – Step-by-Step Process
How a Novated Lease Works for Employees – Step-by-Step Process
- Choose Your Car – Select any make or model (new, used, or even your current car in some cases).
- Lease Agreement – Your employer agrees to make the lease payments from your salary package.
- Bundled Running Costs – Payments can include registration, insurance, fuel, servicing, and tyres.
- Tax Benefits – Payments are made using a combination of pre-tax and post-tax salary, potentially reducing your taxable income.
- End of Term Options – Pay out the residual, refinance, or upgrade to a new car.
Key Benefits of a Novated Lease for Employees
Key Benefits of a Novated Lease for Employees
Financial Benefits
- Tax Savings – Reduce your taxable income through salary packaging.
- GST Savings – You don’t pay GST on the purchase price (your employer claims this benefit for you).
- Budget Control – Fixed monthly costs make it easier to manage expenses.
- Potential Fringe Benefits Tax (FBT) Optimisation – Reduce FBT impact through post-tax contributions.
Convenience Benefits
- All-in-One Payment – Car finance and running costs combined into one regular deduction.
- No Upfront Lump Sum – No large deposit required in most cases.
- Automatic Payments – No need to remember due dates for rego or insurance.
Lifestyle Benefits
- Drive Newer Cars More Often – Upgrade at the end of each lease term.
- Flexible Vehicle Choice – Choose new, used, or even your current car.
- Stress-Free Ownership – Vehicle costs handled through one package.
Novated Lease vs Car Loan – What’s Better for You?
Novated Lease vs Car Loan – What’s Better for You?
| Feature | Novated Lease | Car Loan |
|---|---|---|
| Tax Benefits | Yes, through salary packaging | No tax benefits |
| Upfront Cost | Usually none | Deposit often required |
| Running Costs | Included in package | Paid separately |
| Vehicle Choice | New, used, or existing car | New or used |
| Upgrade Options | Easy at end of lease | Must sell or trade in |
Earning a salary? Make it work for you!
Looking to save on taxes with a novated lease car?
FAQs – Novated Lease for Employees
FAQs – Novated Lease for Employees
Can I choose any car for my novated lease?
Yes, you can choose new, used, or even your current vehicle, provided it meets lender and employer criteria.
Do I still own the car?
Technically, the financier owns the car during the lease, but you have full use, and you can buy it at the end by paying the residual value.
What happens if I change jobs?
The lease can often be transferred to your new employer, or you can take over the payments directly.
Are running costs included?
Yes, most novated leases include rego, insurance, fuel, tyres, and servicing in the one monthly payment.
Can I salary package a used car?
Yes, many lenders allow used vehicles, subject to age and condition limits.
Will this affect my borrowing capacity?
Yes, as it’s a financial commitment, it may be considered in credit assessments.
What’s the residual value?
It’s the final payment due at the end of the lease, set according to ATO guidelines.
Can I pay out the lease early?
Yes, but check with your provider for any early termination fees.
Are there limits on kilometres driven?
Not usually, but higher kilometres may affect the car’s resale value.
Is novated leasing only for full-time employees?
It’s most common for full-time and part-time staff with regular income, but eligibility depends on your employer’s salary packaging policy.