Novated leasing is one of the most tax-effective and convenient ways to get into your next car — but not everyone knows if they qualify. If you’re wondering whether a novated lease is a good idea for you, or asking “are novated lease payments tax deductible?”, this guide will break it down.
TL;DR
Too long didn’t read
- Eligible: Employees who receive a regular salary from an employer willing to support payroll deductions.
- Not eligible: Sole traders, retirees, and people without an employer to manage the lease.
- Why consider it: A novated lease could save you money by using part of your before-tax income to cover car costs.
- Extra perks: Potential income tax savings, GST savings, fleet discounts, and the Electric Car Discount for eligible EVs.
👉 Want exact numbers? Use the Fleetcare Novated Lease Calculator to see your potential savings.
Who is eligible for a novated lease?
A novated lease is only available if you:
- Are employed and receive a regular salary (full-time, part-time, or in some cases contract roles).
- Have an employer willing to set up the lease and make the salary deductions through payroll.
This means that if you’re a sole trader, freelancer, or retiree, you won’t be able to access a novated lease — as there’s no employer to facilitate the salary packaging arrangement. Other finance options for these groups include personal car loans, chattel mortgages (for business use), or paying outright with cash.
Why does employer involvement matter?
A novated lease is a three-way agreement between:
- You (the employee),
- Your employer, and
- The financier.
Your employer makes the lease payments directly from your salary — using a combination of before-tax and after-tax income. This setup is what creates the tax advantages that make novated leasing attractive compared to a personal loan or paying cash.
Are novated lease payments tax deductible?
No — but here’s the important bit: because payments are made from your before-tax salary, your taxable income is reduced. That means you could pay less tax overall.
You’ll also:
- Save on GST (depending on your employer’s policy you won’t finance GST (up to the maximum amount as set by the ATO each year) on the purchase price of the car or most running costs).
- Access fleet discounts on cars, servicing, tyres, and insurance.
- Potentially save thousands if your car qualifies for the Electric Car Discount (no FBT on eligible EVs).
Is a novated lease a good idea?
For many employees, yes. A novated lease can:
- Bundle your car costs (fuel, rego, insurance, servicing) into one easy payment.
- Spread costs evenly across the year, avoiding bill shock.
- Offer potential savings through tax benefits and discounts.
It’s particularly beneficial if:
- You drive regularly and want predictable car costs.
- You like upgrading cars every few years.
- You’re considering an EV and want to maximise savings.
Does a novated lease save you money?
A novated lease has the potential to save you money — but the exact savings depend on your salary, the type of car you choose, and how much you drive.
Example with a novated lease:
- Someone earning $85,000 annually, traveling 15,000km per year who wants a medium sized $50,000 car over a 5-year lease for about $270* per week, could generate savings around $12,400* over the lease term through:
- Tax benefits (before-tax payments),
- GST savings, and
- Fleet discounts.
Want to see your numbers? Try the Fleetcare Novated Lease Calculator.
* Important Information: The information provided is for general informational purposes only and does not take into account your specific needs, circumstances, or objectives. It is strongly recommended that you consult with a qualified financial advisor before making any decisions based on this information. Fees, conditions, eligibility and credit approval criteria may apply. Income Tax savings are dependent on your taxable income and individual tax status. GST savings are dependent on your employer’s policy and accounting treatment of GST.
FAQs
Can contractors get a novated lease?
Not usually — unless you’re treated as an employee and receive PAYG income.
Does the number of kilometres I drive affect eligibility?
No, but it does affect how much value you’ll get from the lease. The more you drive, the more you may benefit from bundled running costs.
Can I get a novated lease if I change jobs?
Yes. You can transfer your novated lease to a new employer, as long as they agree to take it on.
Ready to explore your options?
If you’re an employee receiving a regular salary, a novated lease could be one of the most cost-effective ways to get your next car. With Fleetcare, you’ll enjoy:
- A car that fits your budget and lifestyle,
- Running costs bundled into one easy payment, and
- Guidance from experts who keep the jargon out of it.
Contact Fleetcare online today or call 134 333.