A novated lease is a three-way agreement between an employer, employee and a financier whereby an employer leases a car on behalf of the employee. A car is leased in your name and running costs such as fuel, insurance and maintenance are all included in a single lease repayment, paid for using a combination of your pre and post-tax salary. This means you could reduce your taxable income and pay less tax.
Benefit of a Novated Lease
Packaging a car via a novated lease is a tax-effective way to drive the car you want.
When you take out a novated lease, part of your payments come from your pre-tax salary, so your taxable income is reduced and you could end up paying less tax throughout the year.
Better still, a novated lease includes not just your lease repayments but also running costs such as fuel, registration and servicing. These are costs you incur for your car whether you lease or not – so why not use your pre-tax salary to help cover these every day costs – and potentially reduce your taxable income at the same time.