Novated leasing is one of the smartest ways to get into your next car— potentially saving on tax, bundling expenses, and enjoying a seamless car experience. But a common question pops up: who pays Fringe Benefits Tax (FBT) on a novated lease? Let’s break it down.
What is Fringe Benefits Tax (FBT)?
Think of FBT as the taxman’s way of making sure non-cash perks—paying for a car using some of your before-tax income—are taxed fairly. Since novated leases could offer significant financial advantages, the Australian Taxation Office (ATO) applies FBT to balance things out.
Who Pays FBT on a Novated Lease?
For a standard novated lease, the employer is responsible for paying FBT to the Australian Taxation Office (ATO). However, this cost is factored into the lease agreement, meaning employees indirectly cover the expense by making an after-tax payment to offset the FBT.
🚗 The Electric Car Discount: Good news! If you’re leasing an eligible electric vehicle (EV), your payments are entirely before-tax—meaning no FBT applies. That’s right, an FBT exemption for EVs makes them an even more affordable option. (Heads up: This exemption for plug-in hybrid electric vehicles ends on 1 April 2025 unless your lease was in place before then.)
How FBT is Calculated on a Novated Lease
The simple way FBT can be calculated:
Statutory Formula Method: FBT is set at 20% of the car’s base value, no matter how much you drive.
Not sure which works best for you? Fleetcare’s team can help crunch the numbers.
Can You Reduce or Offset FBT?
Yes! There are clever ways to cut down or eliminate FBT on your lease:
- Go electric – With the Electric Car Discount, eligible EVs are FBT-free—so you could save even more.
- Use the Employee Contribution Method (ECM) – Making some payments from after-tax salary could reduce FBT liability.
- Choose a lower-cost car – Since FBT is based on the car’s value, a more budget-friendly option means less tax.
How Fleetcare Makes Novated Leasing Easy
We handle all the complicated tax stuff, so you don’t have to. Whether it’s structuring the lease that best fits for you, guiding you through FBT exemptions, or helping you find the best EV deals, we’ve got your back.
The Bottom Line: Who Pays FBT?
- Employers pay FBT to the ATO, but this cost is built into the lease, meaning employees indirectly cover it.
- Eligible EVs may be FBT-exempt, potentially offering significant tax savings.
- Strategies like ECM can help reduce or eliminate FBT liability.
- Fleetcare makes the process simple, ensuring you get the most out of your novated lease.
Thinking about a novated lease? Talk to Fleetcare today and let’s get you on the road—without the tax headache.