Novated Leasing – Some Common Myths Busted

Novated Leasing – Some Common Myths Busted

Sep 29, 2018, 7:07:04 PM Opinion

Novated car leases allow employers to take on the car lease on behalf of employees to reduce their gross earnings with a salary sacrifice and in turn their income tax. However, mostpeople really don’t understand how it works and this has led to a number of myths and misconceptions. Some of the most common myths debunked:

Novated Leases Are Meant for Employees with High Salaries

Novated leasing as a tax savings technique works for everyone regardless of salary amount as it helps to reduce the taxable income by the amount of salary sacrifice made to cover the lease rental and costs of the vehicle running, maintenance, insurance, etc. All employees also gain due to savings on GST, as well as,the substantially lower prices on the cars, due to the bulk buying by the lease companies.

The Car Has to Be Driven a Certain Minimum Number ofKilometers Annually

While earlier, there used to be such a restriction, the 2011 changes in the FBT laws have taken care of it. Regardless of the number of kilometers that you drive annually, the fringe benefits tax remains the same flat rate of 20%. On the contrary, driving less will perhaps be beneficial since the condition of the car will be better and will, therefore, fetch a better price when you sell it off.

Only New Cars Are Eligible for A Novated Lease

While a new car will give you better performance and peace of mind, you can also buy a used car if you wish with a novated lease from any of the reputed lease companies. However, normally, leasing companies will only offer cars that will not be more than eight years old at the end of the lease tenure. Use the handy vehicle solutions novated lease calculator to find out how much your lease rentals and income tax savings will be for your selected car model.

You Get Ripped Off on Running Expenses andTires

Sure, you can always get ripped off on anything if you deal with a company that has no reputation and believes in skimming customers. To get a fair and transparent deal, it is imperative that you only deal with a reputable lease company. They will be ready to give you all the details of how they have structured the running cost of your car into the lease agreement and how they will give you the credit for costs that you actually don’t incur.

You Can’t Save on GST in Novated Leases

When you buy a car directly, you can’t claim credit for GST. A leasing company saves you money as they get the GST credit because they, in turn, charge GST on the lease rentals. Your employer also can claim the GST creditand pass on the benefit to you resulting in your ultimate saving.


Purchasing cars on a novated lease make very good sense for employees as well as employers. With the common misconceptions dispelled, you can go ahead and approach your employer for your next car purchase and save substantially.

Published by Lucy Jones

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