What is a novated lease in Australia?

A novated lease is a three-way agreement between you, your employer, and a finance company. Your employer makes car lease payments from your pre-tax salary, reducing your taxable income. The lease covers the car purchase price and can include running costs like fuel, insurance, registration, servicing, and tyres.

Are electric vehicles FBT exempt on a novated lease?

Yes, electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs) with a value at or below $91,387 (the luxury car tax limit for fuel-efficient vehicles) are exempt from Fringe Benefits Tax until 31 March 2027. This makes EVs significantly cheaper to salary sacrifice than petrol or diesel cars.

How much can I save with a novated lease?

Savings depend on your salary, the car price, and whether it's an EV. On an $85,000 salary with a $45,000 EV, you could save $10,000-$15,000 over a 3-year lease through GST savings, reduced income tax, and $0 FBT. Higher income earners in higher tax brackets save more.

What happens to a novated lease if I change jobs?

If you change jobs, your novated lease can be transferred to your new employer (novated again). If your new employer doesn't offer novated leasing, you can make the payments yourself until you find an employer that does, or pay out the lease early.

What is the GST saving on a novated lease?

When you buy a car through a novated lease, you don't pay GST on the purchase price or running costs. On a $50,000 car, that's approximately $4,545 in GST savings alone. This is because the finance company claims the GST input credit.

Novated Lease Calculator

Calculate your novated lease savings including GST, income tax, and FBT. Compare EV vs petrol costs with 2025-26 tax rates.

Last verified: 1 July 2025

How much can a novated lease save me in Australia?

A novated lease bundles car payments and running costs into pre-tax salary sacrifice. You save through: no GST on the purchase price or running costs (~10% saving), reduced income tax (sacrificed amount taxed at 15% instead of your marginal rate), and — for eligible EVs under $91,387 — a full FBT exemption until 31 March 2027. Source: Australian Taxation Office.

Worked example. $90,000 salary leasing a $55,000 EV over 5 years: GST savings ~$5,000 on purchase + ~$2,000 on running costs. Income tax saving on ~$18,000/year sacrifice at 30% MTR → ~$2,700/year. Total 5-year saving ~$20,000-$25,000 vs financing the same car. A $45,000 petrol car on the same salary with 20% statutory FBT saves much less — usually $5,000-$8,000.