Novated leasing
A car, its running costs and the tax — arranged so you keep more of your salary.
A novated lease is a three-way agreement between you, your employer and Novate.it. Your employer pays the lease from your salary before tax; we manage the car. Here is exactly how it works, with the numbers.
The arrangement
What a novated lease actually is.
A novated lease is a car lease in your name that your employer agrees to pay on your behalf, out of your salary, for as long as you work there. The "novation" is the legal step that moves the payment obligation from you to your employer.
Because the payments come out of your salary before income tax is calculated, your taxable income falls — and so does the tax you pay. Because your employer is a business, it also claims the GST back on the car and its running costs, and passes that saving on to you.
The car is still yours to choose and yours to drive. Nothing about the arrangement ties it to work use — in fact the tax rules assume you use it privately.
If you leave your employer, the novation ends and the lease simply reverts to you: keep paying it, novate it with your next employer, or pay it out.
The package
One deduction, built from eight lines.
Everything the car costs to finance and run is budgeted up front for your term and kilometres, then divided across your pay periods. GST is stripped from every running cost before it reaches your payslip.
Worked example
Toyota RAV4 Hybrid
$52,500 · 36 months
15,000 km/yr · NSW
| Component | Per year (ex GST) | Per fortnight |
|---|---|---|
| Finance repayments | $11,541 | $444 |
| Fuel | $1,330 | $51 |
| Servicing & maintenance | $1,364 | $52 |
| Tyres | $409 | $16 |
| Comprehensive insurance | $1,091 | $42 |
| Registration & CTP | $1,273 | $49 |
| Roadside assistance | $100 | $4 |
| Management fee | $360 | $14 |
| Total package | $17,466 | $672 |
Deducted pre-tax
$268
per fortnight
Deducted post-tax (ECM)
$404
per fortnight — cancels the FBT
Illustrative. Running-cost budgets are set per quote from your kilometres, state and vehicle; finance at 7.49% p.a. with the residual at the ATO minimum.
- 01
Budgets, not guesses
Fuel, servicing and tyres are budgeted from your annual kilometres and the vehicle's actual consumption and service schedule. Under-spend is reconciled back to you at the end of the year. - 02
GST comes off every line
Your employer claims the GST on running costs and on the car itself (up to the ATO car limit). On this example that's $593 a year on running costs plus $4,773 on the purchase. - 03
The residual is fixed on day one
A residual (balloon) of 46.88% — $23,183 here — is set at the ATO minimum for a 36-month term. It never changes, so you always know what it costs to own the car outright.
Fringe benefits tax
Why there's a small post-tax portion — and why EVs don't have one.
A car provided through salary is a fringe benefit. The ATO values it with a simple statutory formula, and a post-tax contribution of the same amount cancels the tax entirely.
The statutory formula
Taxable value = 20% × base value of the car × days available ÷ 365
FBT payable = taxable value × 2.0802 (gross-up) × 47%
- Base value
- $52,500
- Taxable value (20%)
- $10,500
- FBT if nothing were done
- $10,266
- Post-tax contribution (ECM)
- $10,500/yr
- Base value
- $58,990
- Taxable value
- $0 — exempt
- FBT
- $0
- Post-tax contribution
- $0 — 100% pre-tax
The Employee Contribution Method (ECM) splits your deduction: most of the package comes out pre-tax, and an amount equal to the taxable value comes out post-tax. Every post-tax dollar reduces the taxable value dollar-for-dollar, so the FBT falls to nil and your employer has nothing to pay. The platform calculates the split on every quote version and includes it in your Disclosure Pack.
For an eligible battery-electric vehicle the taxable value is zero, so there is no post-tax portion at all. See the electric vehicle page for the eligibility rules.
Lease types and terms
New, on order, restructured or extended.
Most people take a new-vehicle lease over three to five years, but the platform supports the full set — including restructuring a lease you already have.
| Type | What it's for | Term | Notes |
|---|---|---|---|
| New vehicle | A brand-new car on a new finance facility. | 12 – 60 months | Fleet pricing sourced through our dealer network, or bring your own quote. |
| Pre-delivery | A car on order with a delivery date months away. | 12 – 60 months | Pricing is locked now; deductions start on delivery. |
| Restructure | Change the term, kilometres or budgets on an existing lease. | 3 – 60 months | Same car, same funder; new schedule and updated Disclosure Pack. |
| Extension | Keep the car past the original end date. | 3 – 60 months | Residual is re-set from the current balance at ATO minimums. |
| Used or demo | A used vehicle, or the one you already own (sale-and-leaseback). | 12 – 60 months | Subject to age at end of term and your employer's policy. |
From quote to keys
Every quote passes through the same stages — and you can see which one it's in.
- 1
Draft
You
Build the quote in the portal — save and come back any time.
- 2
Submitted
Consultant
A consultant reviews and prices it within one business day.
- 3
Confirmed
Novate.it
Pricing locked for 30 days. Disclosure Pack issued.
- 4
Signature
You + employer
E-sign the lease and novation agreement — no printing.
- 5
Active
Everyone
Deductions begin. Claims, documents and support in one place.
| Status | What it means | What happens next |
|---|---|---|
| Draft | You're building the quote. Save it and come back on any device. | Submit, or ask a consultant to help |
| Submitted | Waiting for a consultant to review and price it. | Consultant reviews within 1 business day |
| Under review | A consultant is applying funder pricing and your employer's policy. | Sent to your employer, or confirmed |
| Confirmed | Pricing locked for 30 days. Your Disclosure Pack is ready. | E-signature requested |
| Awaiting signature | Lease and novation documents are out for e-signature. | You and your employer sign |
| Active | Fully executed. Deductions start from the agreed pay run. | Claims, budgets, documents, renewal |
| Expired | Not actioned within 30 days — pricing has lapsed. | Re-quote in one click |
| Cancelled | Explicitly cancelled by you, your employer or a consultant. | Documents voided; nothing owed |
End of lease
Ninety days out, you choose what happens next.
The residual is fixed on day one, so there is nothing to negotiate. Your portal shows the four options, with the numbers, three months before the lease ends.
- 01
Renew
Start a new lease on a new car. The wizard is pre-filled with your details and salary; your old car is sold to clear the residual. - 02
Extend
Keep the same car for another term. The residual is re-set from the current balance; deductions usually fall. - 03
Pay out
Pay the residual and own the car outright. The platform shows the exact figure and generates the payout letter. - 04
Return
Hand the car back and let the sale proceeds settle the residual. Any surplus is yours; any shortfall is payable.
Questions
Things people ask before they start.
Does a novated lease suit everyone?
No. It works best if you are a PAYG employee, expect to stay employed through the term, and would otherwise have bought a car with a loan or savings. On higher marginal tax rates and on eligible EVs the saving is substantial; on very low incomes or very cheap cars it can be small. The calculator shows the comparison against buying privately so you can judge for yourself.
Is there a minimum salary?
There is no legal minimum, but your take-home pay after deductions must remain above the thresholds your employer sets, and the tax benefit grows with your marginal rate. Employers can set an employee maximum lease value in their policy.
What if I drive more or fewer kilometres than budgeted?
Budgets are reconciled annually and you can restructure at any time. Over-spend on fuel or servicing is drawn from your other budgets first; persistent under-spend is refunded to you through payroll.
Who owns the car?
The finance partner holds title during the lease, as with any lease. You are the registered operator and the insured driver, and you become the owner when the residual is paid.
How long does it take?
A self-serve quote takes minutes. Consultant confirmation is within one business day. If your car is in stock, e-signature and settlement typically complete within a week; the lease then starts on your next available pay run.
Ready to see your numbers?
Run a quote against your own salary in a couple of minutes, or talk to a consultant about what your employer's policy allows.