Novated leasing can be the most cost-effective and tax-effective way for ordinary Australians to own a new car - even if it’s for 100 per cent personal use. I will secure a transparent, fair and simple novated lease solution.
Fill in the form below - there’s absolutely no obligation
A novated lease is a cost-effective and tax-effective way to buy and run a car, because the repayments and running costs come out of your pre-tax salary. (This is why it’s sometimes called ‘salary sacrifice’.)
You do not pay GST on the new car. That’s a massive up-front saving. On a $55,000 vehicle, for example, that’s a $5000 saving right there.
Maximum GST saving possible is $6191. That’s for the 2023-’24 financial year. This is based on the ATO’s ‘car limit’ for the current financial year, of $68,108. ($6191 is the GST component of $68,108 - ie, one-eleventh of the price.) More info on this page at the ATO.
I also laid this out on this YouTube ‘short’.
Your novated lease is a simple, three-way agreement between you, your employer and a leasing company.
You agree to have the repayments deducted (sacrificed) out of your salary, in exchange for the use of the vehicle. This can include all the running costs, such as fuel, maintenance, insurance, servicing and registration. The vehicle does not have to be for business use. It can be 100 per cent personal use.
Your employer completes the paperwork and makes a regular, automated payroll deduction from your salary. This is paid directly to the lender to finance your car. That’s all your employer needs to do.
The leasing company sources the vehicle GST-free for you, and does all the administrative ‘heavy lifting’ - establishing the lease contract and other compliance details.
After everyone signs, your novated lease is up and running and you are funding the vehicle using, in part, funds you otherwise would have paid in income tax.
My novated lease contacts are people I trust, based on my long-term relationships with them.
There’s no up-front obligation.
Please use this form below ONLY FOR NOVATED LEASE ENQUIRIES.
For standard car-buying enquiries (non-novated enquiries) - fill in the form on this page
If you’re an ordinary employee, you won’t pay the GST on the new car if you use a novated lease
There are several ways a novated lease reduces your tax obligations.
You do not pay GST on the purchase price of the vehicle, up to the ATO-specified ‘car limit’ in the particular financial year. ($68,108 in 2023-’24.) More here.
You pay the lease with pre-tax salary, meaning some of the money you would otherwise pay in tax is used to fund the car
Operating costs can be packaged in this way also. When this is done it’s called a ‘fully maintained novated lease’
A novated lease reduces your taxable income
With novated leases on conventional cars there is some fringe benefits tax (FBT) obligation. You should discuss this with your accountant, even though the FBT obligation is usually small in relation to the overall amount saved.
Electric vehicles (EVs) under the luxury car tax threshold for so-called ‘eco cars’ ($89,332 in the 2023-’24 financial year) are not subject to any FBT liability. This new legislation regarding EVs makes novated leasing and EVs an unbeatable value combination for many people (see below). If you’re on a salary, it’s hard to see a cheaper way to acquire an EV.
If you leave your job, for any reason, the novated lease essentially reverts to a standard car loan
If you leave your job or are fired during the term of a novated lease, the repayment obligation remains your responsibility.
If this happens, the lease is generally de-novated, and the running costs are removed from the agreement. The repayments then function basically in the manner of a conventional car loan.
In some large or medium-sized organisations, employers appoint a single novated lease provider to service their needs.
Often enough in this situation the financier ramps up the price of the agreement and profiteers unfairly from the arrangement. Essentially they enjoy a monopoly, and they milk it for all it’s worth, because employees either do not, or cannot, shop around for a better deal.
When this happens, many of the savings potentially on the table evaporate for you, the employee. You have to be extremely wary of this.
Fill in the form below, and we can show you what a good value novated lease actually looks like, from my trusted contacts in the industry.
Additionally, always check with your accountant or other financial professional to confirm that a novated lease is right for your particular financial circumstances.
When establishing a novated lease, be realistic about the term. Do not end the lease early, because (as with many finance agreements) there are penalties involved. For example, do not begin a five-year novated lease if you are going to retire in two years. Do not start a five-year lease if you think the ‘novelty’ of a particular car will wear off before the end of the term. If you’re on a particularly high salary, a shorter term novated lease might suit you better (eg, two years) - this way you can upgrade early and potentially make some profit out of the residual.
Electric vehicles are now completely exempt from fringe benefits tax under a novated lease agreement (provided they cost less than the luxury car tax threshold for fuel-efficient vehicles)
The Australian Federal Government passed the Treasury Laws Amendment (Electric Car Discount) Bill 2022 in December 2022. The changes are back-dated to 1 July 2022.
Essentially this means EVs and plug-in hybrid EVs (PHEVs) under $89,332 financed through a novated lease will pay ZERO fringe benefits tax.
This represents a massive and unprecedented saving for people like you. In fact, PHEVs and EVs will generally be cheaper to novated lease, even compared with paying cash up front. (This is possible because marginal tax rates are generally a lot higher than interest rates.)
If you’ve been sitting on the fence regarding buying an EV or plug-in hybrid, and uncertain about whether to proceed because of the significantly elevated purchase price of these vehicles, the goalposts just moved - a long way.
Essentially the new legislation means the cost of ownership, in terms of the impact to your take-home pay, of an EV like a Hyundai Kona Electric or Tesla Model 3 (ie, EVs costing $60-something thousand dollars) is now about the same as the cost of owning a $35k Toyota Corolla - provided you own them under a novated lease.
EVs eligible for this FBT exemption include the Tesla Model 3, BYD Atto 3 (incl. the extended range version), MG ZS EV, Nissan Leaf (incl. e+), Hyundai Kona Electric, MINI Cooper EV, and Polestar 2. Click here for my full list of green cars that qualify for zero FTB.
Remember, the FBT concession is available on new and used EVs and PHEVs that were first delivered after 1 July 2022. This means: If you start a novated lease on a used EV from a dealer or private seller, and that vehicle was first delivered prior to 1 July 2022, the vehicle will be ineligible for the FBT concession.
What is that price, exactly? Is it the driveaway price? Is it the manufacturer’s list price? Is it exclusive of GST?
Correct answers: No, no and no.
And where, exactly, do accessories, options, modifications, paint protection and other treatments, stamp duty, rego, etc., fit in? Whjat is included, and what’s not? I’ve done a full report on this on my YouTube channel - it’s this video
According to the ATO, on this page, the $89,332 includes:
GST
Customs duty/import tariff. (Remember, we have free-trade agreements with Japan, South Korea, Thailand, China & USA - so there’s no customs duty on cars from those countries.)
Dealer delivery
Standard & statutory warranties
Accessories
Modifications (except for disability mods, which do not affect the LCT price status of a vehicle)
Treatments (paint protection, etc.) “before delivery or under an arrangement with the supplier or an associate of the supplier”
Fleet rebates, runout model support incentive payments “and any other motor vehicle incentive payments that are a third-party consideration”.
But the $89,332 does not include:
Other Australian taxes - such as rego, transfer fees, and stamp duty
CTP insurance
Extended warranties
Costs associated with financing the car.
Service plans.
Hyundai IONIQ 5 Techniq is well under the LCT threshold - but you can easily tip it over with options and accessories. This would be a very expensive mistake to make.
HYUNDAI IONIQ 5 Techniq: Driveaway in NSW $85,603 (source: Redbook)
Subtracting rego, stamp duty, CTP and number plate fee of $4214 (source: Redbook) brings the LCT computation value to roughly $81,400.
Therefore, this vehicle is comfortably under the LCT eco car threshold.
You need to be extremely careful about accessories, options and treatments, if you are already close to the LCT limit with the base vehicle.
Hyundai IONIQ 6 Techniq - shares many fundamentals with IONIQ 5 but blows the LCT price cap by around $500
HYUNDAI IONIQ 6 Techniq: Driveaway in NSW $89,955 (source: Redbook)
Subtracting rego, stamp duty, CTP and number plate fee of $4566 (source: Redbook) brings the LCT computation value to roughly $85,400.
Therefore, this vehicle will qualify for FBT exemption because it is within the $89,332 limit.
On-road costs (the statutory ones) vary from state to state, so it’s impossible to be precise - but if you want a ballpark drive-away price to aim for, you will need to get the vehicle in the early-$90ks to be in the running for zero FBT. If you are close, you really will need to investigate the price diligently - for example by conscripting your accountant or other qualified financial advisor - because a mere $1 error could end up costing you tens of thousands of dollars in lost savings.
More employers should consider allowing their employees to take out novated leases.
Here’s why.
It’s a massive reward to the employee, and all it costs you as an employer is some paperwork and a regular (automated) payroll deduction. (The lender typically does all the administrative heavy lifting.)
It’s a great way to reward and retain valuable employees, with almost zero impact on the business’s bottom line.
If the employee leaves the business, the lease, and the vehicle, leave with them. You, as the employer, are unencumbered - there’s no vehicle left in the company parking lot, and associated finance overhead to worry about.
Owing to the passage of the Treasury Laws Amendment (Electric Car Discount) Bill 2022 in December 2022, a novated lease program for EVs and plug-in hybrids is a tremendous ‘green’ initiative costing very little to the business. (If you’ve got solar on the roof - perhaps you could even incentivise employees with free charging out the front…)
Try to avoid offering novated leases only for senior staff - it can create an ‘us and them’ situation on the shop floor. Especially as novated leasing is a benefit, often, to staff on moderate incomes.
If you are an employer and you’d like to discuss setting up a novated lease program for your staff, please fill in the form. We’ll call you to discuss - completely obligation-free.
Please use this form ONLY FOR NOVATED LEASE ENQUIRIES.
For standard car-buying enquiries (non-novated enquiries) - fill in the form on this page
