TranslateNovated Lease Education Centre
How a novated lease works
General information and an indicative estimator - not a quote. All figures are approximate and for educational purposes only.
How a novated lease works
A novated lease involves three parties: you, your employer and a finance company. The finance company owns the vehicle. Your employer deducts the lease repayments from your salary before income tax is calculated and remits them to the finance company. You use the vehicle and, at the end of the lease term, you have options such as paying the residual value, refinancing or returning the vehicle.
Running costs - fuel or charging, registration, insurance, servicing and tyres - can also be bundled into the package, making it easier to budget for all vehicle-related costs in one fortnightly or monthly deduction.
If you leave your employer before the lease ends, the lease obligation typically reverts to you. This is an important consideration before entering into a novated lease.
Private use, business use and logbooks
Most novated leases are structured around personal use of the vehicle. Where a vehicle is also used for genuine business purposes, a logbook may be used to establish the business use percentage, which can affect how FBT is calculated.
A logbook must be maintained for a continuous 12-week period and must record each business journey: date, destination, purpose and kilometres. Commuting - travelling from home to your usual place of work - is not business travel for FBT purposes.
Results will vary depending on tax tables, your tax bracket, employer FBT status and actual versus estimated kilometres. Indicative figures do not constitute a quote or guarantee.
Indicative estimator
Figures produced by this estimator are indicative only and are not a quote, financial advice or guarantee of outcome. Results depend on your personal tax position, employer FBT status, ATO rules and actual costs. Consult a qualified adviser before making decisions.
