You have probably heard about a novated lease if you are looking for a new car. It sounds like a smart way to save money on a vehicle. But the first question many people ask is: Am I allowed to get one?
It can feel confusing when you start looking into it. There are rules about your job. There are rules about the car. There are even rules about who you work for.
This guide will explain everything you need to know. We will break down the requirements step by step. By the end, you will know exactly if you qualify for a novated lease.
Table of Contents
- What is a Novated Lease?
- The Basic Eligibility Rules
- Employee Requirements
- Employer Requirements
- Vehicle Requirements
- Special Case: Can You Lease an Electric Vehicle?
- What Happens if You Change Jobs?
- Frequently Asked Questions
- Key Takeaways
- Conclusion
What is a Novated Lease?
Before we talk about who qualifies, we need to understand what this actually is.
A novated lease is an agreement between three people. It involves you, your employer, and a finance company . The finance company buys the car you want. Your employer then pays for the lease using money from your salary before tax is taken out .
This is called salary sacrificing or salary packaging . Because the payments come out of your pre-tax salary, your taxable income goes down. This means you usually pay less tax .
It is a popular way to get a car in Australia. It can save you money on the car itself and on running costs like fuel and servicing .
The Basic Eligibility Rules
There are a few basic rules you must meet to qualify for a novated lease.
First, you must be at least 18 years old . Second, you need to be an Australian tax resident . Third, you must have a regular, permanent income. Lenders want to know you can afford the repayments .
You also need a current Australian driver’s license or learner’s permit . These are the starting points. But there is more to consider.
Employee Requirements
You Must Be a Permanent Employee
The most important rule is that you must be an employee. You need to be on a company’s payroll and receive a regular wage .
Usually, you cannot get a novated lease if you are self-employed or a sole trader . The arrangement relies on your employer making the payments.
However, there is an exception. If you own a company and you pay yourself a regular salary through that company, you might be eligible . The company acts as your employer for the lease.
You Must Have a Regular Income
Lenders need to see you have a steady income. This proves you can pay back the loan. If your income changes a lot, it might be harder to qualify.
The finance company will check your pay slips. They want to make sure your salary is enough to cover your living costs plus the lease payments. This is a standard check for any loan.
You Must Agree to a Salary Sacrifice
A novated lease is a type of salary sacrifice. This means you agree to get less take-home pay. In exchange, your employer pays for your car before tax .
You must sign a formal agreement to do this. This gives your employer permission to deduct the payments from your salary . It is a legal document that protects everyone involved.
Employer Requirements
Your Employer Must Offer Novated Leasing
Not all employers offer novated leasing. Your company must have a policy that allows salary sacrifice for cars . Some businesses just do not offer it as a benefit.
If your employer does not offer it, you cannot get a novated lease through them. You could ask your human resources team if they would consider setting it up. But they are not required to say yes.
The Employer Must Be Australian-Based
The company you work for must be based and registered in Australia . The lease is linked to Australian tax laws. An international employer would need an Australian entity to set this up.
The Employer Has Responsibilities
Your employer has responsibilities in this arrangement. They must deduct the lease payments from your salary. They also have to handle fringe benefits tax (FBT) reporting if it applies .
However, the employer does not take on the financial risk of the car. If you leave the company, the lease goes with you . They are just the middleman for payments.
Vehicle Requirements
Any Make or Model
Here is some good news. You can usually choose any car you want. It does not have to be a specific brand. It can be a new car, a used car, or even the car you already own .
There are no strict rules about the type of car. However, your employer might have their own rules. It is best to check with them before you start shopping .
New or Used Car
You are not limited to brand-new cars. You can get a novated lease on a used car. However, the car must be under a certain age at the end of the lease. Most providers require the car to be less than eight years old .
This rule protects the value of the car. If the car gets too old, it might not be worth what is left on the lease.
Sale and Leaseback
Here is a lesser-known option. You can even package a car you already own . This is called a sale and leaseback.
Your company buys your current car from you at market value. Then, they lease it back to you. You can then salary sacrifice the payments . This can save you money on the running costs of a car you already drive.
Special Case: Can You Lease an Electric Vehicle?
There is special news for electric vehicles (EVs). If you are eligible for a novated lease, an EV can offer extra savings.
Currently, the Australian government offers a fringe benefits tax (FBT) exemption for some EVs . This can make an electric car much cheaper to lease than a petrol car.
This applies to battery electric vehicles and hydrogen fuel cell vehicles. Plug-in hybrids no longer qualify for this exemption. They were removed from the list in April 2025 .
To get the FBT exemption, the EV must also be under the luxury car tax threshold. For the 2025-26 financial year, this is $91,387 . Luxury car tax must never have been paid on the vehicle. It must be the first time the car has been used .
What Happens if You Change Jobs?
This is a very important question. What happens if you leave your job while you have a novated lease?
The short answer is that the responsibility for the payments shifts to you . The lease is tied to you, not your employer. You cannot just walk away from it.
There are a few options if you change jobs:
- De-novate the lease: This means the employer is removed from the agreement. You take over the payments yourself, like a standard car loan .
- Re-novate the lease: If your new employer also offers novated leasing, you can transfer the lease to them. It might be possible to do this smoothly, but you must check with your lender first .
- Sell the car: You can sell the car to cover the outstanding balance. If the sale price is less than what you owe, you will need to pay the difference .
It is important to have a plan. The lender will expect you to keep making payments, no matter what happens with your employment.
Frequently Asked Questions
1. Can I get a novated lease if I am a casual worker?
It is unlikely. Most lenders require a permanent, regular income. Your income must be stable to qualify for the loan.
2. Can I get a novated lease if I am self-employed?
You usually cannot, because you need an employer to make the payments. However, if you own a company and draw a salary, you might be able to.
3. Does my car have to be new?
No. You can get a novated lease on a new or used car. You can even use a car you already own.
4. Does a novated lease affect my borrowing capacity?
Yes. It reduces your take-home pay. This can affect how much money you can borrow for a home loan. It is a factor lenders will consider.
5. What happens if I lose my job?
The responsibility for the lease payments becomes yours. You will either need to make the payments yourself or sell the car to pay off the loan.
6. Can I get a novated lease if my employer is a sole trader?
As long as the business is registered and operating in Australia, and they offer the benefit, it should be fine.
7. Are electric vehicles eligible for novated leases?
Yes, they are eligible. They also may offer extra tax savings through an FBT exemption. This makes them a very attractive option.
8. Can I lease any car I want?
Generally, yes. Most makes and models are allowed. However, you should always check with your employer first.
9. What is the minimum salary for a novated lease?
There is no set minimum salary. However, you need to earn enough for the payments to be deducted while still having enough to live on.
10. What is sale and leaseback?
This is a way to package a car you already own. Your employer buys the car from you, and then you lease it back through salary sacrifice.
Key Takeaways
- You need a job: You must be a permanent employee with a regular income to qualify for a novated lease.
- Your employer must offer it: Your company needs to allow salary sacrifice for cars.
- The car is your choice: You can choose a new or used car of any make or model.
- Electric vehicles offer more savings: Some EVs are exempt from FBT, which can make them cheaper to lease.
- The lease is yours: If you change jobs, the responsibility for the lease follows you.
Conclusion
So, who is eligible for a novated lease? The answer is simple. You need to be a permanent employee working for an Australian company that offers this benefit. You need a steady income and a valid driver’s license.
If you fit these criteria, a novated lease could be a fantastic way to get a new car and save on tax. The process is straightforward. The savings can be substantial.
It is not available to everyone. But if you meet the requirements, it is worth exploring. Just remember that the lease is your responsibility. It is a financial commitment, but one that can offer great rewards.
Speak to your employer first to see if they allow novated leasing. Then, talk to a finance provider to check your eligibility. You might be surprised at how simple it is to get behind the wheel of a new car.