Novated Lease


A Novated Lease is an alternative way for employers to supply cars to their employees, and for employees to buy a new car TAX FREE!.

A Novated Lease agreement allows employees to salary package vehicles of their choice offering real savings when purchasing their vehicles, and delivering some attractive benefits for employees and their employers.

With a Novated Lease agreement, employees can benefit from saving money on tax and save 1000’s of dollars year on year, by paying for all their car costs from their pre-tax salary, including all fuel, running and maintenance costs. PLUS, all running costs are charged without GST which instantly allows for a 10% saving.


A customised operating lease gives you full use of an asset while allowing you to avoid many of the risks typically associated with ownership – such as depreciation in value, obsolescence and asset disposal.

How it Works:

An operating lease acts as a true hiring arrangement where the asset is treated as an expense, allowing you to finance your equipment off balance sheet for accounting purposes.

A Novated Lease is a 3-way arrangement between the employee, the employer and the financier where the obligations under the finance lease are transferred from the employee to the employer through a Deed of Novation, and the employer assumes responsibility for making the lease payments to the financier. The Deed of Novation remains in force until the earlier of the end of the lease term, or until the employee ceases employment.

A Fully Maintained Novated Lease is an arrangement where the all of the operating costs (such as lease rental, servicing and maintenance, registration, tyres and insurance) of the motor vehicle are covered by a single monthly payment made by the lessee to the leasing company. The leasing company takes care of all maintenance and administration costs of the motor vehicle.

A Non-Maintained Novated Lease has the lessee responsible for all maintenance and other running costs of the motor vehicle.


There are a number of benefits associated with novated leases. The employee can lease the motor vehicle of their choice. The motor vehicle can be leased where the private use of the vehicle is 100%. When an employee ceases employment, the responsibility for the lease reverts back to the employee.

The concept of novated leasing is central to salary packaging arrangements between an employee and an employer. Under a salary packaging arrangement, an employee agrees to forego a portion of their salary or wages in return for benefits equal to that amount.

For a novated lease, the lease and running costs of the motor vehicle, and fringe benefits tax (if applicable) are deducted from the employee’s pre-tax salary, and PAYG is calculated on the reduced salary or wages. Depending on the employee’s individual financial circumstances, salary packaging a motor vehicle under a novated lease can have the effect of increasing an employee’s net disposable income.

Other benefits of a Novated Lease include repayments fixed over the term of the loan, the term of the loan ranges from 12 months to 60 months. As the financier is the owner of the motor vehicle, they claim the GST on the purchase price, meaning that the employee finances the GST-exclusive amount.

Under a salary packaging arrangement, the employer is entitled to claim an input tax credit for the GST components of the lease payments and other running costs of the motor vehicle. If the employer passes back to the employee the input tax credits, the employee is effectively paying the lease and running costs net of GST.

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