We’re taking a short break to recharge for the new year. Our offices will be closed from 24 December 2025 and will reopen on 5 January 2026.
Trustpilot
Fingo
1300 134 646

Novated Lease Basics

A Novated Lease is a three-way agreement between an employee, employer, and financier that enables salary packaging for a motor vehicle. Through a Deed of Novation, the employer assumes most of the employee’s rights and obligations under the lease (excluding the residual value) for the duration of the lease or the employee’s employment.

A novated lease allows employees to finance a car using pre-tax salary, offering tax savings, bundled running costs, and flexible end-of-lease options with minimal upfront costs.

Most full time and some permanent part time employees who pay tax (PAYG) and havepasted their probation period can qualify. Self-employed individuals generally do not qualify.

Cars, SUVs, and light commercial vehicles are eligible. Motorcycles and heavy vehicles are generally excluded.

Yes, subject to approval by the lease provider and compliance with ATO guidelines.

Yes, novated lease vehicles can be used for both purposes.

Financial and Tax Matters

Your salary is reduced by the lease payment amount and the budgeted running cost before tax, reducing your taxable income.

Use online calculators or consult a tax advisor. Tax savings depend on your salary, vehicle costs, and lease terms.

While GST applies to novated leases, employees benefit by not having to pay GST on the vehicle and most associated costs, as the employer can claim an input tax credit, making the overall package more cost-effective.

By apply or having a novated lease does not generally impact you credit rating other than a record of credit inquiry will be recorded when you apply for one. However, failing to make payments can still negatively affect your credit score.

Lease Structure and Options

The estimated value of the vehicle at lease end, set by ATO guidelines. It's payable if you wish to purchase the car and it's subject to GST.

Yes, you can terminate a novated lease at any time. However, this usually involves fees or penalties on the unpaid interest.

Yes, but expect fees and penalties. Check your lease agreement for specifics.

Yes, you can generally change the terms of your novated lease during the lease period, but there are conditions, limitations, and potential costs involved. Please speak with your novated lease administrator for specifics.

End of Lease and Employment Changes

You become responsible for payments. You may transfer the lease to a new employer or convert it to a finance lease.

You can often transfer it to a new employer or convert it to a finance lease make direct payments.

Yes, it is possible, but the process depends on several key factors, including the terms of your existing novated lease, your employer’s agreement, and the policies of your lease provider.

Vehicle Choices and Add-ons

Yes, but vehicle condition and age limits apply depending on the provider.

Often yes, for items like window tinting or tow bars, subject to approval.

Yes, you can modify a novated leased vehicle, but with important restrictions and conditions, since the vehicle is technically owned by the leasing company during the lease period

In most cases, you can have more than one novated lease, but each vehicle requires a separate lease agreement. You can’t include multiple vehicles under a single novated lease.

Yes, within ATO guidelines and provider restrictions.

Insurance and Maintenance

Insurance should cover repairs or replacement. Review policy terms.

Expenses like fuel, insurance, servicing, tyres, and registration.

Yes, typically comprehensive coverage.

Employer and Compliance Matters

Yes, there are typically mileage (kilometre) restrictions on a novated lease, but they are flexible and adjustable depending on the lease provider and agreement.

Generally no. Self-employed individuals need alternative finance options.

Consider your tax bracket, job stability, and vehicle use. Consult a financial advisor for tailored guidance.

EV-Specific Novated Leasing

Some novated lease packages allow the inclusion of charging costs, particularly from public charging stations, within your pre-tax salary deductions. However, reimbursement for home charging may require additional documentation, such as electricity bills or usage logs. Providers may vary in what they accept, so it’s important to ask whether EV charging can be bundled into the lease and what’s required for substantiation.

EVs generally require less maintenance than petrol or diesel vehicles, no oil changes, fewer moving parts, and lower wear and tear on brakes. Most novated lease providers still include routine servicing in the lease package, and may partner with EV-certified mechanics or dealerships. Be sure to check whether your provider covers EV-specific maintenance items like battery health checks.

Yes, in many cases, you can include EV-related accessories like charging cables, portable chargers, and wall-box home chargers in your novated lease agreement. These must be purchased and listed on the tax invoice at the time of lease setup and may require installation by an authorised provider.

In many cases, yes. When you factor in lower fuel (charging) costs, reduced maintenance, and potential FBT exemptions, EVs can offer significant savings compared to petrol or diesel vehicles. Bundling these costs into your pre-tax salary via a novated lease structure can amplify these benefits, particularly for drivers with high annual mileage.

Any government changes to EV incentives, such as the FBT exemption or state-level rebates, apply based on the rules in effect at the time your lease is signed. If incentives are removed or revised later, they typically won’t impact existing lease agreements. Always check the fine print with your provider and stay informed about policy updates.

Comparisons with Other Finance Options

A chattel mortgage is typically used by businesses or self-employed individuals that has genuine business use to purchase vehicles and claim GST credits, interest and depreciation. Novated leases are designed for employees, where the employer handles lease payments via your pre-tax income, potentially reducing your taxable income and increasing your take-home pay. A traditional car loan is paid from post-tax income and does not include vehicle running costs.

A novated lease may result in greater tax efficiency and convenience, especially when all running costs are bundled. A car allowance is simply additional income, which may be fully taxable and leave you to manage all car expenses independently.

Novated Leasing for Employers

Typically, there are no direct costs to the employer beyond administration. However, it can be an attractive benefit to offer employees and support staff retention.

Employers may be eligible to claim input tax credits (GST) on the lease payments if the vehicle is leased in their business name. Consult a tax advisor for specifics.

Post-Lease Scenarios & End-of-Term Options

You would need to pay the difference out-of-pocket or re-finance it if you wish to buy the car. This is why setting a realistic residual value from the beginning is essential.

Yes, some finance providers offer residual refinance options, allowing you to continue paying off the residual over time instead of a lump sum.

GST and Fringe Benefits Tax (FBT) Mechanics

As of 1 July 2022, eligible zero or low-emission vehicles under the luxury car tax threshold are exempt from FBT when provided via novated lease. This significantly enhances the tax savings potential. This exemption will be in place until mid 2027, and depending upon the government's review it might be extended, amended or removed. But for any leases that were entered prior the 30th June 2027 their exemption will be honored for the entirety of their lease.

In most cases, no. The leasing provider or your employer manages the FBT obligations through a system called the Employee Contribution Method (ECM), which balances tax liabilities within the package.