Key Takeaways
- No GST on the car price: You don’t pay GST on the vehicle itself - it’s already handled as part of the lease, saving you thousands upfront.
- Running costs include GST: Fuel, servicing, insurance, tyres, and management fees technically have GST, but it’s structured so you only pay the pre-GST portion via salary sacrifice.
- GST on lease-end buyout: If you purchase the car at the end of the lease, GST applies to the residual value, which must be paid out of pocket.
- Employer participation matters: These GST savings only apply if your employer is GST-registered and participates correctly in the novated lease.
- Used or new cars: The same GST rules apply - it depends on whether the vehicle is sold through a GST-registered dealer.
GST and novated leases go hand in hand, and salary packaging (a novated lease) can lead to strong GST savings.
Let’s break it down:
You Don’t Pay GST on the Purchase Price of the Car
When your employer purchases or leases the vehicle as part of your novated lease, they’re entitled to claim an input tax credit for the GST. That means:
You don’t pay GST on the car’s price.
On a $40,000 car, that’s a $3,636 saving right off the bat.
You Do 'Technically' Pay GST on Running Costs - But It’s Claimed Back
Fuel, servicing, insurance, tyres, management fees, these ongoing running costs usually include GST. But under a novated lease:
Clear Lease will ensure your employer can claim back that GST too, so in effect, you only end up paying the ex-GST amount via your salary sacrifice.
Residual Value GST
If you choose to purchase the vehicle at the end of the lease, the residual value is subject to GST - and this is the one thing that can’t be salary packaged. You’ll need to pay it out of pocket, including the GST component.
Example:
If your residual is $15,000, you’ll pay $16,500 including GST.
Important Caveats
- Your employer must be registered for GST and participate in the lease correctly for these savings to apply.
- Packaging limits apply for some roles (e.g. government thresholds or capped FBT benefits).
- These benefits are only possible through a properly structured novated lease via an approved provider like Clear Lease
