Your novated lease guide

01 / Your guide

How a novated lease works

You, your employer and a finance company agree how a car lease will be paid through your salary package.

1. Check your employer's policy

   Ask whether novated leasing is available to you, which providers you can use and whether your employment type is supported.

2. Choose the car and inspect the quote

   Agree the vehicle, lease term, finance amount, running-cost budget and fees. Read the lease and salary-packaging documents together.

3. Arrange payments through payroll

   The employer takes on the agreed lease obligations while the novation operates. Salary deductions fund the package. A provider may administer the budget and bills. [1, 2]

4. Plan for the end from the start

   Regular deductions do not settle every possible cost. Understand the residual payment, end-of-term options and what happens if your employment changes.

Fringe benefits tax (FBT) applies to certain benefits provided through employment. The treatment affects how the package is structured. Some electric car benefits can be exempt; see the eligibility page. [3, 4]

Salary packaging must be arranged before the relevant salary is earned. Employer participation and finance approval are separate from any tax concession. [1, 3]

02 / Your guide

Understand the effect on your pay

Ask for the change in the amount that reaches your bank account, using the same pay period before and after the lease.

Use annual figures when changing periods: annual / 52 for a weekly average, / 26 for a fortnight and / 12 for a month. Two fortnights are not one calendar month. Confirm the actual payroll schedule.

03 / Your guide

Compare with your current car

Start with the same number of kilometres and the same period on both sides. Then check what each figure includes.

Use your recent bills where possible. For an EV, check home and public charging prices and how often you expect to use each. An estimated budget is a starting point; update it when your driving changes.

For a full-term comparison, include each option's upfront payments, cash paid over the same term, any remaining debt or residual, and the value of the car you still own at the end. Use consistent sale assumptions. If using depreciation as an ownership cost, avoid also counting the same purchase value through principal repayments.

Ask the provider: Can you show the regular cost difference and a separate full-term comparison, with all assumptions visible?

04 / Your guide

Ask for an itemised quote

Give each provider the same vehicle, term and annual kilometres. Ask for these details in writing so you can compare the offers.

Ask for a revised quote with unwanted optional products removed, then compare the complete cost again. Keep the quote, assumptions and version date together.

05 / Your guide

Plan for the residual and work changes

Your budget needs to cover the lease during employment and the obligations that remain when the arrangement ends.

The final payment

The residual is an amount left at the end of the lease. Ask for its dollar value, GST treatment and due date. It is additional to the regular pay-impact figure, unless that figure explicitly includes a separate provision for it.

Plan on funding it from after-tax money. Ask whether buying the car, refinancing or arranging a sale is available under your contract. Refinancing requires approval and creates further costs. Selling the car may leave a shortfall after the payout and fees. The residual does not guarantee what a buyer will pay. [7]

Changing employer or pausing pay

A deed of novation usually transfers lease obligations back to the employee when their employment ends. A new employer may agree to a new novation, but do not assume it will accept the lease or provider. [2]

06 / Your guide

Check eligibility for the actual car

Tax treatment depends on the vehicle and arrangement. A car being electric does not establish every condition.

Rules checked 13 September 2026. Recheck before signing or changing an arrangement.

The electric car FBT exemption

The ATO's exemption conditions include a qualifying zero or low emissions car, first held and used on or after 1 July 2022, provided for private use by a current employee or their associate, with no luxury car tax payable on its supply or importation. Battery electric and hydrogen fuel-cell cars can qualify. The car must meet the relevant passenger/load limits. [4]

A used car can qualify, but its original history matters. A low used-car purchase price does not prove that no luxury car tax was payable. Ask the provider to verify the car's first-use date, classification and tax history. [4]

Plug-in hybrids

From 1 April 2025, plug-in hybrids generally stopped qualifying. Continuing exemption needs exempt use or availability before that date and an existing binding commitment to provide that vehicle for private use afterwards. Optional extensions do not count as binding; changes can end the exemption. [5]

Reportable fringe benefits

An exempt electric car benefit can still be reportable. Reportable fringe benefits are not taxable income, but can affect HELP repayments, Medicare levy surcharge, child support and some income-tested benefits. Ask payroll or a registered tax agent how this applies to you. [4, 6]

07 / Your guide

Take this checklist to your provider

Bring your questions before making a commitment. Leave any unresolved item open until you have an answer you can keep.

• My employer has confirmed whether I can use the proposed provider and arrangement.
• I have the vehicle price, finance rate, all fees and optional products in writing.
• I understand the pre-tax deduction, post-tax deduction and estimated reduction in net pay.
• Both car comparisons use the same period and annual kilometres, with realistic running costs.
• The quote shows what is excluded and how unused funds or budget shortfalls are handled.
• I know the residual including any GST, when it is due and how I intend to fund it.
• I have checked job-change, unpaid-leave, transfer and early-termination terms.
• The provider has verified eligibility for this car and explained any reportable fringe benefit.
• I have checked any effect on HELP, income-tested benefits or other personal tax obligations.
• I have read the documents and understand what is still subject to approval.

Ticks stay on this page only and are not sent to XOLT.

My three questions before I decide

1. Space to write your question
2. Space to write your question
3. Space to write your question

XOLT Lease helps you understand indicative costs and prepare for a provider conversation. Use the calculator as a starting point, then compare its assumptions with the itemised quote. Your employer, provider and relevant adviser confirm the arrangement that applies to you.

08 / Your guide

Sources and further reading

Official Australian sources underpin the factual explanations. The questions and checklist help you examine your own quote.

1. ASIC Moneysmart - Salary packaging

   Employer participation and the salary-packaging process.

2. ATO - GST and vehicles purchased under novated leases

   The deed of novation, employment ending and GST treatment.

3. ATO - Salary sacrificing for employees

   Salary arrangements, deductions and tax treatment.

4. ATO - Exempt cars

   Electric car conditions, used cars and reporting.

5. ATO - FBT on plug-in hybrid electric vehicles

   The 1 April 2025 change and transitional conditions.

6. ATO - Reportable fringe benefits for employees

   Income tests and obligations affected by reportable benefits.

7. ATO - Car leasing and FBT

   Lease conditions and residual value treatment.

8. Treasury - Electric car discount draft changes consultation

   Draft policy context; not a substitute for enacted law.

Prepared by XOLT Lease. Version 1.0.0. Reviewed 13 September 2026. Links and rules can change; use the current official guidance when making a decision.