When it comes to saving on car expenses through your salary, two common terms often cause confusion, novated leases and salary sacrifice car leases. At first glance, they may seem interchangeable, but dig deeper and you’ll find important distinctions in structure, tax benefits, and employer involvement. In this guide, Fingo unpacks everything Australian employees need to know in 2025 to make a confident, tax-smart decision.
What Is Salary Sacrifice in Australia?
Salary sacrifice is a broad financial arrangement where an employee agrees to forgo a portion of their pre-tax salary in exchange for certain benefits. These benefits could include superannuation contributions, laptops, phones, or even cars.
A salary sacrifice car lease, then, is simply using salary packaging to finance a vehicle. This is where novated leasing enters the picture—as the most popular and tax-efficient form of salary sacrifice for cars.
What Is a Novated Lease?
A novated lease is a specific three-way agreement involving:
- The employee (you)
- Your employer
- A finance provider
Under this setup, your employer deducts lease repayments and car running costs from your pre-tax salary and pays them directly to the provider. The result? Your taxable income is reduced, which can significantly improve your take-home pay.
A novated lease can also include extras like:
- Fuel
- Registration
- Maintenance
- Comprehensive insurance
- Roadside assistance
All bundled into a predictable monthly deduction.
Novated Lease vs. Salary Sacrifice Car Lease: What’s the Difference?
Think of it this way:
- Salary sacrifice is the umbrella concept.
- Novated leasing is a specialised form of salary sacrifice that applies to car leases.
But the terms get blurred because most salary-packaged car leases are novated leases. The real differences come down to the structure and level of employer involvement.
Let’s break this down.
Key Differences Explained
| Feature | Novated Lease | Generic Salary Sacrifice Car Lease |
| Parties Involved | Employee, employer, lease provider | Employee, employer |
| Vehicle Ownership | Finance company during lease | Depends on employer’s scheme |
| Employer Role | Makes payments on your behalf | May vary—some are employee-managed |
| Tax Savings | Reduces taxable income + GST savings on running costs | Reduces taxable income (structure-dependent) |
| Fringe Benefits Tax (FBT) | May apply, but can be minimised or exempt with EVs | May apply—employer pays or shares cost |
| Bundled Expenses | Often includes fuel, insurance, rego, maintenance, etc. | Not always included |
| End-of-Lease Options | Balloon payment, trade-in, or refinance | Varies—sometimes lacks flexible options |
| Administration & Support | Professionally managed (e.g., by Fingo) | May require more employee admin |
Tax Advantages: Why Novated Leasing Stands Out
In a properly structured novated lease:
- Your lease payments are deducted before tax, lowering your taxable income
- Running costs can be bundled and tax-deducted
- GST is often waived on the purchase price (thanks to Fingo’s buying power)
- Electric vehicles (EVs) leased under novated agreements may be FBT-free in 2025
Salary sacrifice leases that aren’t novated may not always include bundled expenses or offer the same level of tax optimisation.
Employer Involvement & Flexibility
Novated leases are attractive to employers too:
- They don’t add costs to payroll (since deductions come from employee salary)
- They offer a staff benefit that helps attract and retain talent
- Providers like Fingo handle all the admin, compliance, and support
In contrast, a generic salary sacrifice lease may require more employer setup or lack the turnkey support a novated lease offers.
What Happens If You Change Jobs?
With a novated lease, you can:
- Transfer the lease to your new employer
- Take over payments personally until you’re re-employed
Other salary sacrifice arrangements may be harder to transfer or cancel. Novated leases are designed with job movement in mind, making them far more flexible.
Are Novated Leases the Best Form of Salary Sacrifice?
In most cases, yes. Especially for full-time PAYG employees with stable income, novated leasing offers:
- Maximum tax advantages
- GST savings
- One predictable deduction
- EV-friendly benefits
- Expert support from providers like Fingo
While a generic salary sacrifice lease might suit employees at smaller firms or those who prefer minimal employer involvement, it lacks the full-stack savings potential and ease of a novated lease.
What to Look for in a Novated Lease Provider
If you’re considering this route, make sure your provider offers:
- Transparent pricing (no hidden fees)
- Full expense bundling
- EV lease options and FBT guidance
- Support during job changes
- Access to national fleet discounts
Fingo ticks all these boxes—offering Australian workers a seamless, tax-smart path to driving the car they want.
Final Thoughts: Which Should You Choose?
If you’re asking, “Should I salary sacrifice a car?”—the real answer is: yes, through a novated lease.
It gives you all the perks of salary packaging, plus additional tax, GST, and admin advantages. In 2025, with rising living costs and more ATO-endorsed EV incentives, there’s never been a better time to consider one.
Explore your savings and options with Fingo, and let your car work smarter for your income.