Novated lease

A novated lease is a three-way agreement where an employee leases a car, the employer takes over the payments from pre-tax salary, and the car becomes a fringe benefit the employer accounts for.

Novated cars sit in a strange corner of fleet management: the employee chooses and drives the car, the employer carries the FBT accounting, and the FBT is usually offset by after-tax employee contributions.

For FBT the operating costs of a novated car are the lease charges plus running costs; deemed depreciation and interest do not apply because the employer does not own the car. Eligible electric vehicles under the luxury car tax fuel-efficient threshold have made novated EVs popular, since the FBT can be exempt entirely.

Last updated 10 July 2026. General information, not tax or legal advice.