Novated Lease - Salary Package Your Car

Typical savings are 30-45% of total vehicle running costs (purchase + running costs) depending on your income tax rate. Breakdown: Income tax savings (20-30% of total costs depending on your marginal rate), GST savings (10% of purchase price and running costs), fleet discounts (some lease providers negotiate dealer discounts), bundled costs (streamlined servicing and insurance rates). For example, a $40,000 car costing $17,000/year to run might cost you only $11,000-$12,500/year net with a novated lease. That's $4,500-$5,500 annual savings, or $22,500-$27,500 saved over a 5-year lease.

FBT is a tax employers pay on non-cash benefits provided to employees. For novated leases, you usually elect to pay the FBT yourself (called "Employee Contribution Method") so your employer doesn't have to. Your lease provider calculates the FBT based on your vehicle's value and your estimated private use percentage. Important: Electric vehicles (EVs) under $91,387 are FBT-exempt since July 2022, making EV novated leases exceptionally tax-effective (potentially 45-55% total savings). For standard petrol/diesel vehicles, FBT is around $2,000-$5,000/year depending on vehicle value, but this is more than offset by the tax savings you gain.

Yes, through a process called "sale and leaseback." Here's how it works: (1) A novated lease provider "purchases" your existing vehicle from you, (2) They immediately lease it back to you under a novated lease arrangement, (3) Your employer agrees to the salary packaging arrangement, (4) You start receiving immediate tax savings on your existing car. This works even if you have an existing car loan - the lease provider can refinance it. Vehicle must be in good condition and typically less than 10 years old. This is an excellent option if you already own a car and want to start salary packaging immediately.

You have three options: (1) Portable to new employer (most common): Take your lease to your new employer - they simply sign the agreement to continue payroll deductions. 98% of employers agree as there's no cost or liability to them. (2) Convert to post-tax: Continue making payments from after-tax income (loses tax benefits but keeps the car). (3) Terminate lease: Pay out the residual value, sell the car, or return it to the lease provider (may incur early termination fees of $500-1,500). Most lease agreements allow portability, and given how common novated leases are (200,000+ Australians have them), new employers are very familiar with continuing existing leases.

No, absolutely not. Common employer concerns addressed: They pay nothing (you pay for everything via salary deductions), they have no financial liability (lease is between you and the provider), they take on zero risk (if you leave, lease goes with you or terminates), their admin burden is minimal (just process one payroll deduction line item), they face no FBT liability (you elect to pay FBT yourself). The lease provider typically indemnifies employers against any liability. This is why 85-90% of Australian employers participate in novated leasing - it costs them nothing, takes minimal admin, and is a popular employee benefit.

A fully maintained novated lease typically includes: Vehicle finance (purchase price bundled into lease), fuel (fleet card provided, all fuel costs bundled), insurance (comprehensive coverage arranged), registration and CTP (annual rego costs included), servicing and maintenance (scheduled services covered), tyres (replacement tyres when needed), roadside assistance (24/7 coverage), and lease management (provider handles all administration). You get one simple pre-tax payment that covers EVERYTHING. No more separate bills. Alternatively, choose "finance only" novated lease (excludes running costs but still gets tax benefits on vehicle payments). Most people choose fully maintained for maximum convenience and tax efficiency.

Minimum salary around $50,000 gross provides meaningful tax savings (19-32.5% marginal rate). Below $50k, tax savings are smaller but GST savings (10% on purchase) still make it worthwhile. Maximum salary has no cap - higher earners (marginal rate 37-47%) benefit most from tax savings. Sweet spot is $70k-$180k where you pay significant tax but not so much that you're restricted to very expensive vehicles. That said, even earners above $180k benefit substantially from novated leasing, especially for prestige vehicles where the GST savings alone can be $6,000-$10,000 on a $70k-$110k purchase.

Novated lease wins for PAYG employees who qualify, regular car loan wins for others. Choose novated lease if: you're a PAYG employee (not contractor), earn $50k+ gross income, employer agrees to facilitate (most do), plan to keep vehicle 3-5 years, drive significant kilometers (maximize fuel savings). Choose regular car loan if: you're self-employed/contractor (not eligible for salary packaging), prefer simpler finance (just car + loan, no bundled costs), want to own the car outright faster (no residual), dislike the idea of involving your employer. Financial comparison: $40k car over 4 years might cost $17,000/year with novated lease (after tax savings) vs $20,000+/year with regular loan (no tax benefits). That's $12,000+ saved over the lease term.