What is Novated Lease?

The Novated lease enables your employee to lease a car of their choice using a Finance Lease. You, the employer, pay the lease rentals directly to the financier, whilst your employee enjoys the full benefits of the car.

How Does it Work?

There are three steps to Novated Lease.

If you are the Employer:

  1. Your employee chooses the car and leases it from the financier under a Finance Lease.
  2. Your employee sub-leases the car to you under an Operating Lease.
  3. You, the employer and the financier enter into an agreement which makes you, the employer responsible for meeting the lease rentals to the financier for the time that your employee works for your company (called a deed of Novation).


Monthly Lease Rentals are subject to 10% GST.
Therefore you can claim them as a “Tax Input Credit”.

Benefits to you, as the employer:

  • Off-Balance Sheet
  • Tax Deduction for lease rentals
  • Should the employee leave the car is no longer your responsibility
  • Your single obligation is to make monthly rentals.
  • Administration is relieved of cost burden related to acquisition and disposal of car.
  • Direct debiting of your monthly payments can be arranged saving you time and money.

Benefits to you as the employee:

  • Freedom to choose the car and be the registered owner.
  • The ability to transfer (novate) the lease to a new employer.
  • Unrestricted private use at a prefixed and controlled cost.
  • Cash savings through the utilization of Pre-tax salary (salary sacrifice).

Want to know more?