Neomoney Novated Lease Finance


Tax Savings


No Deposit


Pay No GST


Let’s get you Approved Today!

What Is A Novated Lease?

A novated lease is a financing arrangement that can be a cost-effective and tax-efficient way to purchase a new vehicle or the second family vehicle you’ve always dreamed of owning. It involves a tripartite agreement between you, your employer, and a lender. The agreement, which is called a Deed of Novation, allows you to use pre-tax income to finance the vehicle’s purchase, which can help reduce your taxable income and increase your take-home pay.

One of the benefits of a novated lease is that it can offer competitive interest rates on the vehicle’s purchase, making it a more affordable option. Additionally, the lease repayments include all the running costs associated with the vehicle, such as fuel, registration, and maintenance expenses. These expenses are paid through your employer as a “salary sacrifice” payment, which means that they are deducted from your pre-tax salary. This can help reduce your taxable income, which in turn can save you money on overall taxes paid.

There are two variations of a novated lease: a lease on just the vehicle or a lease that includes the vehicle’s associated expenses and running costs. An agreed dollar amount is paid to the lender from your pre-tax salary to cover these costs, which helps you manage your vehicle expenses more efficiently.

Overall, a novated lease can be an attractive financing option for those looking to purchase a new vehicle, as it offers several tax benefits and can be more cost-effective than other financing options.

What are the Benefits on a Novated Lease?

The benefits of a novated lease are many, for example;

How Does A Novated Lease Work?

If you plan to purchase a motor vehicle through a Novated Lease, it is important to inform the motor vehicle dealer of this fact at the time of purchase. This is so that the dealer can structure the purchase invoice in accordance with the Novated Lease process. It is also important to note that no GST is paid on the purchase price of the vehicle, as the lender actually owns the vehicle and the invoice will be leased in your name.

A Novated Lease is a type of secured loan, as the loan is secured over the vehicle. Once you have purchased the vehicle and the loan has been set up, your employer will make payments through a payroll deduction to the Novated Lease party. For government employees, these payments are managed by RemServ or Smart Salary group. These payments will include the agreed lease repayments, which will cover the vehicle running costs, using the pre-tax income from your salary packaging account. The Novated Lease group will then make payments to the lender and other vendors as part of the agreement.

One of the benefits of paying the agreed repayments before getting taxed on your income is that it can reduce your taxable income, which may ultimately put more money in your pocket. It is important to understand the details of a Novated Lease before entering into an agreement, and to seek professional financial advice if necessary.

What Can I Include In A Novated Lease Repayment?

A novated lease repayment typically includes a range of vehicle-related expenses such as finance payments, vehicle registration, insurance, petrol, servicing and repairs, and even tyres. Essentially, any cost related to owning and operating a vehicle can be included in the repayment amount.

This is because a novated lease is a type of vehicle financing agreement that allows an employee to lease a vehicle through their employer. As part of the agreement, the employer deducts the lease payments and associated vehicle expenses from the employee’s pre-tax income, reducing their taxable income and providing potential tax benefits.

By including all of the vehicle expenses in the repayment amount, the employee does not have to worry about budgeting for these expenses separately, making it easier to manage their finances. Additionally, including these expenses in the repayment amount can also help the employee save money, as the expenses are paid using pre-tax income.


Within the novated lease repayments, you can include;

  • Finance payments for the vehicle
  • Vehicle registration fees,
  • Comprehensive Insurance coverage for the vehicle,
  • Petrol expenses,
  • Maintenance, repair costs, including regular servicing costs,
  • Replacement tyres,
  • Roadside Assistance or Breakdown coverage,
  • Warranties coverage for the vehicle,
  • Window tinting,
  • Internal upholstery & external paint protection,
  • Vehicle cleaning and detailing,
  • Accessories, i.e. Bike racks, Tow bar, etc.
  • Even the Car Wash, Vehicle Cleaning and Detailing Services.
  • Lease Origination fees,
  • Interest charges on the lease,
  • Any other reasonable expenses associated with the vehicle’s operation and maintenance,
  • For Government Employees, visit the Remserv or SmartSalary websites for further details.


It’s important to note that the specifics of what can be included in a novated lease repayment can vary depending on the lease agreement, employer policy, and local laws. It’s always best to consult with a professional or the lease provider to understand what expenses can be included in the repayment amount.

What Is A Residual Value?

Residual value, also known as a balloon payment, is an amount that is agreed upon at the beginning of a lease agreement, which represents the anticipated value of the vehicle at the end of the lease term. This amount is usually a percentage or a dollar value of the original purchase price. The residual value is paid out if the lessee decides to purchase the vehicle at the end of the lease term. Alternatively, the lessee can also refinance the residual value for another agreed-upon term or sell the vehicle and lease another vehicle of their choice.

The residual value is an important factor to consider when leasing a vehicle, as it impacts the monthly lease payments. If the residual value is set too low, the monthly payments will be higher, as the lessee is essentially paying more towards the value of the vehicle during the lease term. Conversely, if the residual value is set too high, the monthly payments will be lower, but the final purchase price may be more than the actual value of the vehicle at the end of the lease term.

In Australia, the residual value percentages are set by the Australian Tax Office (ATO) based on the length of the lease term, which can range from 24 to 60 months. The ATO provides guidelines for calculating the residual value, taking into account factors such as the type of vehicle, the length of the lease term, and the estimated kilometers driven during the lease term.

It’s important to note that the residual value may vary depending on the terms of the lease agreement and the lessor’s policies.

Below, we list these percentages per term as set out by the ATO.

Lease Term
Residual Value
12 Months


24 Months


36 Months


48 Months


60 Months


Frequently Asked Questions.

The duration for finance approval can vary depending on various factors, such as the lenders current loan process, the type of financing being sought, and the complexity of the application. In some cases, the approval process can be completed within a few days, indicating a quick turnaround time.

Generally, the approval process involves a lender or financial institution reviewing an individual’s financial situation, credit history, and other factors to determine whether they are a suitable candidate for financing. This process may involve various checks and assessments, including credit checks, employment verification, and proof of income.

Some lenders may have streamlined processes in place that allow for quick approvals, such as online applications and automated credit checks. Others may require more documentation and manual reviews, which can prolong the approval process.

It’s important to note that the duration for finance approval can also depend on external factors beyond the lender’s control since a Novated Lease is a tri party agreement, such as delays in obtaining required documentation or other administrative issues. It’s always best to consult with us as we would handle to streamline the finance application.

When choosing a vehicle for a lease, you should consult with your employer to see if there are any restrictions on vehicle make or model. While there may be some non-suitable vehicles, you should generally be free to choose the car you want to drive. However, there may be limitations based on the lender’s criteria, such as the age or dollar value of the vehicle, to ensure that you can afford the repayments. Additionally, the vehicle must not be more than seven years old at the time of lease expiry.

To qualify for a novated lease, you need to have a certain level of income that allows you to meet the lender’s criteria. This is determined by calculating your income and subtracting your living expenses. The resulting disposable income is then evaluated to determine if it meets the minimum income requirement set by the lender.

To determine if you can afford the car you which to purchase, you would need to gather your personal financial information about your current assets and liabilities. These financial details can be used to assess your borrowing capacity and establish affordable for you novated lease repayments. A novated lease is a type of car financing where your employer deducts the lease repayments from your pre-tax income. By choosing this option, you may be pleasantly surprised to find that you can finally drive the car of your dreams with monthly repayments that fit your budget.

Novated Lease vs Vehicle Loan:

Novated Leasing and Vehicle Loans are two different ways of financing the purchase of a vehicle. A vehicle loan is a traditional financing option where the borrower takes out a loan to purchase a car and pays it back over time with interest. A novated lease, on the other hand, is a three-way agreement between an employer, an employee, and a finance company.

Tax Benefits:

One of the biggest differences between a novated lease and a vehicle loan is the tax benefits. When purchasing a vehicle with a traditional vehicle loan or personal loan, the lease repayments are made from after-taxed income, which means income that has already been taxed. In contrast, with a novated lease, the lease repayments are made from pre-taxed income, which means income before taxes are taken out. This can lead to significant tax savings for the borrower.

Pay No GST:

Another benefit of a novated lease is that the borrower can save 10% on the cost of a new vehicle purchase because they do not have to pay the 10% Goods and Services Tax (GST) that is required with a traditional car lease or personal loan.

No Deposit:

With some personal loans or vehicle leases, borrowers may be required to pay a deposit, but this is not the case with a novated lease. This can be particularly beneficial for those who may not have a lot of savings to put towards a deposit.

No Budgets or Payment Reminder to Calculate:

With a novated lease, the borrower makes one payment to cover all of the vehicle expenses, including the lease repayment, insurance, registration, and maintenance costs. In contrast, with a traditional personal loan or car lease, the borrower would need to budget for all of these vehicle expenses separately, which can be time-consuming and complicated.

In summary, while both novated leasing and vehicle loans provide financing options for purchasing a car, a novated lease offers significant tax benefits, the ability to pay no GST, no deposit requirement, and simplified payment management.

It is not possible to contribute your own funds to reduce the repayments on a Novated Lease. This is because a Novated Lease is structured so that the repayments are made from your pre-tax income, which means that the repayments are already being made with the maximum tax benefit. Therefore, any additional funds contributed by you would not reduce the repayments.

However, if you have made a deposit to the dealer to secure the vehicle, this deposit will be refunded to you at the time of settlement. This means that the deposit will not be taken into account when calculating the repayments on your Novated Lease.

Yes, with a novated lease, the vehicle will be registered in your name, the Lessee, not the lender. This means that you will be the legal owner of the car, not the finance company. However, it is important to note that any additional driver of the vehicle will need to be indicated on the insurance policy. This is a requirement to ensure that all drivers are covered in case of an accident or other incident while driving the vehicle. It is also important to review your insurance policy to ensure that it meets your needs and provides adequate coverage for you and any additional drivers of the vehicle.

Fringe Benefits Tax (FBT) is a tax that employers in Australia pay on certain benefits they provide to their employees as part of their remuneration package, including their employees’ families or other associates. The FBT is paid on top of the employee’s salary or wages and is based on the taxable value of the fringe benefit provided.

A novated lease is one such benefit that may attract FBT. When an employer enters into a novated lease agreement with an employee, the employee agrees to make lease payments out of their pre-tax income, which reduces their taxable income. The employer, in turn, takes on the responsibility of making the lease payments to the finance company on the employee’s behalf.

Under the FBT rules, the employer may be required to pay FBT on the value of the novated lease benefit provided to the employee. The taxable value of the benefit is calculated as the sum of the lease payments made by the employer, any associated running costs, and any residual value liability. However, the FBT liability can be reduced by the employee making pre-tax contributions towards the lease payments and running costs.

It is important for employers and employees to understand the FBT implications of a novated lease before entering into an agreement. Employers may need to factor in the FBT cost when considering whether to offer a novated lease to their employees, while employees may need to consider the potential impact on their take-home pay.

In summary, Fringe Benefits Tax (FBT) is a tax paid by employers on certain benefits they provide to their employees, which are in addition to or a part of their salary or wages package. The value of the benefits is calculated, and FBT is paid on them at a varying rate depending on the type of benefit provided and the employee’s income.

I’m Ready!

Are you ready to take the next step towards your dream home? Our team of mortgage specialists is here to help you find the perfect loan product tailored to your unique needs. Whether you're seeking credit advice or simply looking for more information, we're here to answer any questions you may have.

To get started, just click on the enquiry button below and we'll be in touch with you shortly.

Let's make your homeownership dreams a reality!