Novated Leases for Small Businesses & Self-Employed Owners in Australia

Big Cash Flow and Tax Savings

Novated leasing offers big cash flow and tax savings for employees, directors, and self-employed small business owners. The annual tax benefits are typically between $2,000 and $5,000 for personal-use vehicles, with potential for even greater savings if more than 50% of the use is for business purposes.

As a small business owner or self-employed professional, managing expenses is key to maintaining profitability. While traditional car loans and chattel mortgages are common, novated leasing can offer significant tax advantages and cost savings — even if you’re self-employed or running a small business.

Directors and Self Employed Small Businesses

If you pay yourself a salary / wage each week, fortnight or month then you as the business owner will be able to salary package a vehicle on a novated lease.  You have to be an employee to enter into a novated lease as there are three parties to the lease – employee, employer and the financier.

You can also salary package a novated lease for a partner / spouse that is not even employed by the business.  Here at One Car Group we have packaged cars for ourselves, wives and adult children.

Salary packaging is a more tax effective solution for owner / director employees for the following reasons:

• Personal income tax rates are higher than small business income tax rates – 10% plus higher personal tax rates over small company tax rates.  So salary packaging increases the tax benefit when compared to running the cost through the company books.
• If you use the vehicle for business then you get to claim the business use percentage just like you would if the vehicle was financed through the company
• You get to salary package the running costs which again are offset against your higher personal income tax rates – therefore a bigger tax saving
• When you sell the car any profit on disposal is tax free via a novated lease.  Compared to a profit on sale of a vehicle in the company will be taxed in the company

How Novated Leasing Works for Small Businesses?

A novated lease is a three-way agreement between the employee, employer, and a finance provider. The employer makes lease payments and covers running costs via pre-tax salary deductions, while the employee gets to enjoy tax and GST benefits.

How Novated Leasing Works for Self-Employed & Directors?

If you pay yourself a salary, you can enter into a novated lease with your business acting as the “employer.”

There are three parties in the lease: the employee (you), your business as the employer, and the finance provider. This arrangement allows you to package lease payments and running costs (fuel, insurance, servicing) through your pre-tax income, while still claiming deductions for business-related use.

Electric vehicles (EVs) leased under the luxury car tax threshold may also be exempt from Fringe Benefits Tax (FBT), offering additional savings. A List of FBT-Free Eligible Vehicles

Benefits of Novated Leasing

For Employees of Small Businesses

• Improves cash flow with after-tax savings of $2,000–$5,000 a year.
  
• If >50% business use, tax benefits can exceed $5,000 annually.
  
• Salary packaging running costs boosts overall savings.

For Directors & Self-Employed

• Higher personal tax rates mean greater benefit when salary packaging compared to running costs through the company.
• Claim the business use percentage like any other business-financed vehicle.
• Salary package running costs against higher personal tax rates.
• Any profit on disposal is tax-free compared to being taxed in the company.

Additional Advantages

• GST savings on vehicle purchase price and running costs, as the finance provider claims GST credits.
• Bundled running costs into a single monthly payment for easier budgeting.
• Flexibility to choose any vehicle (new or used) and customise lease terms from 1–5 years.
• Compare savings directly with other financing methods using our Car Financing Options guide.

Providing Novated Leases to Your Employees

Offering novated leases can be a powerful recruitment and retention tool. Giving employees a $2,000–$5,000 after-tax benefit is like giving them a pay rise at no cost to your business.
This is especially relevant if you’re competing with larger employers already offering novated lease perks. See our Ultimate Guide to Novated Leasing for Employers for more details.

Quick Set-up & Administration

One Car Group provides an easy, no-cost setup for employers. We handle payroll instructions, invoicing, disbursements to the finance provider, and supplier payments for running costs — all covered via employee salary deductions.

What Happens if an Employee Leaves

If an employee leaves during the lease term, both the car and the finance obligation transfer with them, leaving the employer with no ongoing commitments.

End of Lease Options

At the end of the lease, you can:

• Purchase the car by paying the residual value.
• Trade it in for a new lease.
• Return it without further obligation.

Application Process

• Pay yourself a salary (for self-employed) or identify eligible employees.
• Choose a car — new, used, or EV.
• Set up the lease with One Car Group.
• Bundle running costs.
• Claim deductions for business use.
• Enjoy savings and flexibility.

Full guide here: How to Apply for a Novated Lease.

FAQs

Can a small business owner get a novated lease?

Yes. If you pay yourself a salary from your business, you can set up a novated lease with your business acting as the employer. This lets you package your car payments and running costs through your pre-tax income.

 Do I need to use the car for business purposes to benefit from a novated lease?

No. You can have a novated lease even if you use the car entirely for personal purposes. However, if more than 50% of the use is for business, your tax savings can be even higher.

Can I lease an electric vehicle (EV) through a novated lease?

Yes. Electric vehicles under the luxury car tax threshold may be exempt from Fringe Benefits Tax (FBT), offering additional savings.

Can I include my vehicle running costs in the lease?

Yes. You can bundle fuel, servicing, tyres, insurance, and registration into one monthly payment, making budgeting easier.

What happens if an employee leaves the business during the lease term?

The lease and vehicle transfer with the employee. You won’t be left with ongoing payments or obligations.

Is GST payable on the vehicle or running costs under a novated lease?

No. The finance provider claims the GST on the purchase price and running costs, so you don’t pay GST upfront.

What are my options at the end of a novated lease?

You can buy the car by paying the residual value, trade it in for a new one, or return it.

Q8: Can I novate a lease for a partner or spouse who isn’t employed in my business?
Yes. You can salary package a vehicle for a partner or spouse even if they are not employed by your business.

Q9: How quickly can a novated lease be set up?
With One Car Group, setup is quick and straightforward. We handle payroll instructions, invoicing, and payments to the financier and suppliers.

Ready to save on vehicle costs and maximise your tax benefits? Contact One Car Group for a free consultation and see how much you can save.