If you’ve started researching Novated Leasing, you’ve probably seen it described as a type of salary sacrifice.
That often leads to one common question:
Is a Novated Lease just salary sacrificing – or is there more to it?
What is Salary Sacrificing?
Salary sacrificing is also commonly known as salary packaging. This is an ATO-approved way to use your pre-tax income to cover certain expenses, helping lower your taxable income.
A novated lease is one example of this – it’s a car financing arrangement that involves an agreement between you, your employer, and a provider such as Paywise.
Common salary sacrifice items in Australia include:
- Superannuation contributions
- Work related devices (like laptops or phones)
- Parking or childcare (depending on employer arrangements)
- Vehicles (through Novated Leasing)
Those who work for eligible employers such as not-for-profits and public health organisations may also be entitled to salary package living expenses, mortgage, rent and dining out costs, up to a certain amount.
What is a Novated Lease?
A Novated Lease is a three-way agreement between:
- You (the employee)
- Your employer
- A provider such as Paywise
Your employer agrees to make vehicle-related payments on your behalf, using money deducted from your salary. These payments usually cover:
- The car repayment
- Car running costs (fuel/charging, servicing, insurance, registration, tyres)
Some of those payments come from pre-tax salary, while some may come from after-tax salary.
How Novated Leasing Goes Beyond Salary Sacrificing
A Novated Lease offers benefits that go well beyond simply paying for something from your salary.
1. Bundled Vehicle Costs
Novated Leasing can bundle nearly all car related expenses into one regular payment including:
- Fuel or charging
- Servicing and Maintenance
- Insurance
- Registration
- Tyres
This makes budgeting easier and removes surprise costs.
2. GST Savings
With a Novated Lease, employees can save on the GST on vehicle running costs and purchase price.
3. Choice and Flexibility
You choose the vehicle and how it’s used. Novated Leases allow for:
- New or used cars
- Petrol, Diesel, Hybrid or Electric Vehicles
- 100% personal use (not just work)
4. Electric Vehicle (EV) Benefits go Even Further
Eligible electric vehicles can be exempt from FBT, which means more of the lease can be paid from pre-tax income. This makes Novated Leasing far more powerful than traditional salary sacrificing alone.
A Simple Way to Think About It
You can salary sacrifice many things, and Novated Leasing brings together tax savings, vehicle finance and running costs into one structured package.
Salary sacrificing and Novated Leasing can make a big difference to your take-home pay but it doesn’t need to be confusing.
For more guidance, call us on 1300 132 532 or email cars@paywise.com.au