Salary Sacrifice a Car
Australian novated lease guide and comparison.
Last verified: 2025-07-01 | 2025-26 tax rates
Salary Sacrifice a Car
Salary sacrificing a car through a novated lease lets you pay for your car and running costs from your pre-tax salary, reducing your taxable income and overall cost.
How salary sacrifice works for cars
When you salary sacrifice a car, your employer deducts lease payments from your gross salary before tax is calculated. This reduces your taxable income, meaning you pay less income tax. The arrangement is called a "novated lease" because your employer "novates" (transfers) the obligation to make payments on your behalf.
Who can salary sacrifice a car?
Any employee whose employer offers novated leasing can salary sacrifice a car. Most medium and large employers offer this benefit. You don't need to be full-time -- part-time employees can also participate.
What costs are included?
- Car purchase price (driveaway)
- Fuel or charging costs
- Comprehensive insurance
- Registration and CTP
- Scheduled servicing and maintenance
- Tyres
- Roadside assistance
Tax benefits
The tax benefits come from three sources:
- GST saving: You don't pay the 10% GST on the car or running costs (approximately $4,545.45 on a $50K car).
- Income tax saving: Pre-tax deductions reduce your taxable income, saving tax at your marginal rate.
- FBT exemption (EVs): Electric vehicles under $91,387 are FBT exempt until March 2027, making EVs the best choice for salary sacrifice.
Savings by Salary Level
| Salary | Tax rate | 3yr saving ($45K EV) |
|---|---|---|
| $60,000.00 | 30% | $12,976.36 |
| $75,000.00 | 30% | $12,976.36 |
| $85,000.00 | 30% | $12,976.36 |
| $100,000.00 | 30% | $12,976.36 |
| $120,000.00 | 30% | $12,976.36 |
| $150,000.00 | 37% | $14,723.18 |
More Guides
Frequently Asked Questions
What is a novated lease?
A novated lease is a three-way agreement between you, your employer, and a finance company. Your employer deducts lease payments from your pre-tax salary, reducing your taxable income.
Are EVs FBT exempt on novated lease?
Yes, EVs and PHEVs under $91,387 are FBT exempt until 31 March 2027, making them significantly cheaper to salary sacrifice than petrol cars.
How much can I save with a novated lease?
Savings depend on your salary and car choice. On an $85K salary with a $45K EV, typical savings are $10,000-$15,000 over 3 years.
What happens at the end of a novated lease?
You can pay the residual value to own the car, refinance the residual, trade in and start a new lease, or hand the car back.
Can I salary sacrifice a used car?
Yes, most novated lease providers allow used cars, typically up to 7 years old at the end of the lease term. New cars generally offer better value due to GST savings.
Calculate Your Exact Savings
Use our novated lease calculator with your specific salary, car, and preferences.
Open Novated Lease Calculator