Novated Leasing for Employers - FAQ's

Salary sacrificing is when you exchange part of your pre-tax income for non-cash benefits, novated leasing is one kind of salary sacrificing. The goal is typically to increase take-home pay, or make a salary packaged item more cost-efficient (i.e, getting twice as nice of a car for the same price when it's pre-tax).

A novated lease shifts costs and ownership to the employee, offering tax savings and flexibility, while a company car remains a business asset with full employer responsibility. Learn which option works best for your business on our detailed page.

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FBT is a tax (with a rate at 47%) applied to fringe benefits (incentives beyond salary/wages received from an employer). A non-electric car under a novated lease is a fringe benefit (electric cars are completely FBT exempt in Australia).

The employer is responsible for paying the FBT, but at Clear Lease - we use the employee contribution method (contributing post-tax funds) to offset any FBT to zero.

This works because we can tax deduct any expenses incurred in the arrangement and maintenance of a vehicle as a fringe benefit. We work out the right mix of pre-tax and post-tax payments the employee needs to make to make sure the FBT liability is negligible for the employer.

Novated leasing requires minimal effort as long as your provider has a service focus. With automated systems and clear instructions from providers, your payroll team only needs to process a few deductions and maintain basic records.

Employers need to manage salary deductions, report fringe benefits accurately, and partner with a leasing provider to ensure compliance. The service focus of your leasing provider will determine how much of the administrative tasks are handled by you, vs them.

Employers face very minimal liability with novated leasing. An employers role is limited to facilitating salary deductions and transferring payments. The employee assumes full responsibility for the lease.

Yes, employers can claim the GST on lease payments and running costs, helping to reduce BAS liability. This applies if your business is GST-registered and you comply with record-keeping requirements.

The main consideration is the time required for payroll adjustments, but with modern systems and provider support, this is usually minimal. The benefits—like happier employees and potential payroll tax savings—often outweigh any minor drawbacks.

No, offering novated leasing is cost-neutral for employers. Employees cover the lease costs through their salary, and businesses may even save on payroll tax when implemented at scale.

Self-employed individuals can access novated leasing if they pay themselves a salary through a business structure like a company or trust. For sole traders, a shift to a company structure, or alternative leasing options will be better suited.

Novated leasing used to only make sense for high earners. Thanks to modern tax rules and the ECM method, any employee earning over $40,000 can save on tax and running costs—no matter their car or driving habits.

No, there’s no minimum size. Novated leasing is available for businesses of any size, from sole traders to large corporations.

The next steps will depend on whether employees are staying with the same business entity, or transferring to a new one. The outcome is usually the same though - existing salary packaging agreements can continue with minimal disruption, but will requirement communication with your leasing provider.

If your employee leaves, their novated lease will leave with them, as the agreement is between the employee and the leasing provider, with the employer just as a facilitator. The employee can take it to their next employer, or alternative arrangements can be made to suit the situation.