Benefits Hub
Associate Lease
An associate lease allows eligible employees to package a vehicle owned by a family associate through a formal lease arrangement - potentially reducing taxable income while generating income for the associate.
What is an associate lease?
An associate lease is a salary packaging arrangement where a vehicle owned by an associate of the employee - such as a spouse, partner, parent, sibling (aged 18+), or a family company or trust - is leased to the employer. The employer makes the vehicle available to the employee as part of their employment, and the associated costs are deducted from the employee's pre-tax salary.
The arrangement means the employee's lease and running costs (fuel, maintenance, registration, insurance) are paid from pre-tax income, reducing their taxable salary. The associate receives the lease rental as income.
The associate can claim depreciation and loan interest (if applicable) as tax deductions, and the running costs paid to them are generally GST-free.
How the arrangement flows
Associate owns a vehicle (outright or under finance) and registers it in their name
Associate leases the vehicle to the employee's employer under a formal lease agreement at commercial rates
Employer makes vehicle available to the employee as part of their remuneration package
Lease rentals and running costs are deducted from the employee's pre-tax salary
Employer pays rental to the associate - associate declares this as income and claims eligible deductions
What the arrangement may provide
Pre-tax deductions
Lease costs and running expenses are deducted from pre-tax salary, reducing taxable income.
No finance required
The vehicle can be owned outright by the associate - no car loan or finance arrangement is necessary.
Income for your associate
The associate receives lease rental income, which may be beneficial if they are on a lower marginal tax rate.
GST-free running costs
Running costs (fuel, maintenance, insurance, registration) are generally sourced GST-free through the arrangement.
What can be included?
Typically included
Cannot be included
ATO requirements for associate leases
These arrangements attract close ATO scrutiny. All of the following must be met for the arrangement to be compliant.
Formal lease agreement
A written lease agreement must exist between the associate and the employer. Verbal or informal arrangements do not satisfy ATO requirements.
Commercial rental rates
Rental amounts must reflect genuine commercial rates - not inflated figures. NSP calculates rentals based on car purchase price, lease term, ATO minimum residuals, and a commercial interest rate of return.
Associate holds ABN
The associate must hold an Australian Business Number and an individual (not joint) bank account to receive lease payments.
Vehicle registered to associate
The vehicle must be registered in the associate's name - not the employee's. The employee cannot be the registered owner.
Odometer records maintained
Odometer readings are required at the start of the lease, on 31 March each year, and when the lease terminates.
Positive cash flow for associate
The arrangement must result in taxable income for the associate. It cannot be structured in a way that creates an artificial tax loss.
Frequently asked questions
Interested in an associate lease?
Associate lease arrangements are complex and must be structured correctly. Our team will assess your situation, confirm eligibility, and handle all calculations and documentation - ensuring the arrangement is fully ATO-compliant before it commences.
General information only. Associate lease information provided on this page does not constitute financial, taxation or legal advice. Associate lease arrangements are complex and carry compliance risk if not structured and documented correctly. Eligibility, tax treatment and FBT outcomes depend on individual circumstances and the specific terms of each arrangement. ATO rules are subject to change. You should obtain independent legal and taxation advice before entering into any associate lease arrangement. NSP will assess each arrangement on its individual merits and will not proceed unless satisfied that the arrangement meets ATO requirements.