Do I Pay GST on a Novated Lease?
GST is one of the most misunderstood parts of novated leasing - but when structured correctly, it can lead to big savings. Here's what you do (and don’t) pay GST on, and how your employer helps reduce the cost.
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
Related Information:
The Luxury Car Charge is a salary deduction used to offset the extra tax your employer pays when you lease a car above the ATO’s luxury car depreciation limit. It helps them recover the shortfall from reduced tax deductions.
Please note, this is completely separate from the Luxury Car Tax (LCT).
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.
Our regular novated lease package (fully-maintained) usually includes your car lease repayments, fuel/charging, servicing, maintenance & repairs, registration, insurance, and tyres - all bundled into a single pre-tax deduction.
Yes, but it’s treated as a financial termination. You'll need to pay out the remaining lease value (and any fees), and you may lose some tax benefits. Talk to us to get a payout quote from your financier.
Yes, if you’d like to keep the car, you simply pay the residual value set at the beginning of the lease. You can pay this from your personal funds, or refinance it separately. Once paid, the car is yours. You can also sell or trade it in and start a new lease.
Yes, if your new employer supports novated leasing, you can transfer your lease by signing a new agreement. If they don’t, you’ll need to make private repayments, refinance, or consider ending the lease.
Your lease doesn’t end if you change jobs. You can either transfer it to your new employer, pay privately until the lease ends, or choose to end the lease early.
Cars that are too old, unroadworthy, imported, heavily modified, or intended for commercial use typically don’t qualify for novated leasing. Motorcycles are also excluded under current ATO guidelines.
Luxury Car Tax (LCT) applies to vehicles that exceed the government’s set price thresholds. For the 2024–25 year, it’s $76,950 for standard vehicles and $89,332 for fuel-efficient ones. If your lease includes a car above these values, LCT may be added to your lease costs.
Please note: This is very different to the Luxury Car Charge (LCC).