Can Self-Employed Individuals Use Novated Leasing?

Novated leasing is often associated with employees of larger businesses, but what about those who work for themselves? If you’re self-employed, the eligibility and setup depends on your business structure and how you pay yourself.

Are Self-Employed People Eligible for Novated Leasing?

Yes, but it depends on how your business is set up:

• Company or Trust Structure: If you pay yourself a regular salary, you can use novated leasing just like any other business would.
• Sole Traders: Technically, sole traders don’t receive a salary from a company or trust, which is a requirement for the tax benefits of novated leasing to work. For a sole trader to get a novated lease, they will need to change to from a sole trader structure to another structure (like a limited company) - that would establish a legal separation between the individual owner and the business, and allow the salary to come from the company. For those who want to legally stay a Sole Trader, other leasing options, such as a chattel mortgage or business lease, may provide similar tax benefits and be a better fit.

What Are the Alternatives for Sole Traders?

For sole traders who can't shift to a different structure - traditional novated leasing isn’t an option, but there are alternatives worth considering:

• Chattel Mortgage: Ideal for vehicles used predominantly for business purposes, allowing you to claim GST and depreciation.
• Business Lease: A flexible option for accessing a vehicle, with running costs often tax-deductible if the car is used for business.

Common Misconceptions for Self-Employed Professionals

Misconception #1: “I can’t use novated leasing because I don’t have a big company.”
Your business size doesn’t matter as long as you pay yourself a salary through a company or trust structure. The benefits remain largely the same.

Misconception #2: “It’s too complicated to manage as a business owner.”
Novated leasing providers like Clear Lease make the process simple, offering dedicated support and seamless integration with your business’s payroll system.

Misconception #3: “It’s not worth it unless I drive a lot.”
Modern novated leasing is cost-effective for a wide range of professionals, regardless of annual kilometers or vehicle type, thanks to options like the Employee Contribution Method (ECM).