FAQs

Does a novated lease affect your credit score?

Taking out a novated lease won’t affect your credit score. However, if you miss payments or default on the lease, it might negatively impact your credit rating. The good news is that all of that is handled by your employer, so it’s not something you’ll need to worry about!

You must be employed, and your employer must agree to enter into a novated leasing agreement.

Novated leasing is typically available to permanent full-time and part-time employees, however, eligibility may vary depending on your employer’s salary packaging policy. You must have a consistent income and be able to demonstrate your ability to meet the obligations of the novated leasing agreement.

Can you get a novated lease without an employer?

Usually, you won’t be eligible for a novated lease without an employer. This is because the lease agreement depends on the employer making the payments for you from your pre-tax income. However, there may be some cases where you can lease your EV without a traditional employer agreement. Contact our team to find out more.

Is an EV novated lease good for tax?

Yes, there are significant tax benefits to a novated lease for an EV. This is because the payments that cover the vehicle and other extras are coming out of your pre-tax income, which at the end of the financial year, can mean less tax paid! You can even be eligible to avoid fringe benefits tax, because you’ll be driving an electric vehicle.

Do you pay for fuel/electricity with a novated lease?

You can choose whether or not fuel/electricity is included in your lease agreement. At CarBon we always include fuel/electricity in your quotes but it depends on what provider you choose to go with. If it is, it means that the pre-tax deductions from your salary will include a fuel allowance. Otherwise, you will need to purchase fuel/electricity as normal.

– You can claim GST off the purchase price and running costs of your vehicle.

– Using your pre-tax dollars to pay for a vehicle may reduce your overall income tax liability.

– It allows you to budget the running costs of your car into one easy pre-tax payment, taking the worry out of servicing, registration and maintenance.

Check out our novated leasing calculator, which has a convenient comparison tool where you can see how much you save if you salary sacrifice a car versus buying it outright.  

This information may be regarded as general advice. That is, your personal objectives, needs or financial situation were not taken into account when preparing this information. Accordingly, you should consider its appropriateness, having regard to your own objectives, financial situation and needs before acting on it.

Can I sell a car under a novated lease?

You can sell the vehicle at the end of your lease term.

Who is eligible for a novated lease?

To be eligible, you must be at least 18 years old and an Australian permanent resident or citizen. You must have a valid Australian driver’s license or learner’s permit and intend to purchase a passenger car. You cannot take out a novated lease on vehicles designed to carry one tonne or more, or designed to carry nine passengers or more.
You must be employed, and your employer must agree to enter into a novated leasing agreement. Novated leasing is typically available to permanent full-time and part-time employees, however, eligibility may vary depending on your employer’s salary packaging policy. You must have a consistent income and be able to demonstrate your ability to meet the obligations of the novated leasing agreement.

How do I change employers with a novated lease?

We will liaise with your new employer and their payroll team to set everything up for you. It is a quick and easy process that takes the stress out of changing jobs. Just make sure you let your new employer know that you have a novated lease with your existing employer.  

What salary is best for a novated lease?

There is no minimum or maximum salary requirement when it comes to a novated lease.
Many people can benefit from using their pre-tax dollars to pay for their vehicle and running expenses, not just high-income earners.

What are the hidden costs of a novated lease?

There are no hidden costs with a CarBon Novated Lease. Everything will be clearly outlined on your quote, and your consultant will go through all the details with you. If you have any further questions, reach out to our friendly team.

Is it better to salary sacrifice or buy a car?

Salary sacrificing a vehicle through a novated lease offer many benefits that buying a car outright may not offer.

– You can claim GST off the purchase price and running costs of your vehicle.

– Using your pre-tax dollars to pay for a vehicle may reduce your overall income tax liability.

– It allows you to budget the running costs of your car into one easy pre-tax payment, taking the worry out of servicing, registration and maintenance.
Check out our novated leasing calculator, which has a convenient comparison tool where you can see how much you save if you salary sacrifice a car versus buying it outright.
This information may be regarded as general advice. That is, your personal objectives, needs or financial situation were not taken into account when preparing this information.
Accordingly, you should consider its appropriateness, having regard to your own objectives, financial situation and needs before acting on it.

Is novated leasing actually cheaper?

Yes, novated leasing can be cheaper than buying a car outright or getting a traditional car loan. With a novated lease, electric vehicles (EVs) are exempt from fringe benefits tax (FBT), offering significant income tax savings. Petrol vehicles also provide income tax savings, including GST savings on the vehicle purchase and running costs. These savings may not be available with traditional finance or outright purchases. Use our novated lease calculator for easy cost comparisons and see how much you could save compared to buying outright or getting a car loan.
This information may be regarded as general advice. That is, your personal objectives, needs or financial situation were not taken into account when preparing this information.
Accordingly, you should consider its appropriateness, having regard to your own objectives, financial situation and needs before acting on it.

What happens to a novated lease if I leave my job?

CarBon novated leases are fully transferable. We can help you move your lease to your new employer. If you’ve left your job and chosen to take some time off, you can choose to take on the lease payments yourself for a period of time; we can help you with this and crunch some numbers for you.

How do I change employers with a novated lease?

We will liaise with your new employer and their payroll team to set everything up for you. It is a quick and easy process that takes the stress out of changing jobs. Just make sure you let your new employer know that you have a novated lease with your existing employer.

Are you locked into a novated lease?

Ending your lease agreement is subject to the terms and conditions of your Novated Lease Agreement. If you choose to terminate your lease early, you will need to finalise any outstanding lease payments, including the residual payment. If the market value of your vehicle is less than the amount required to pay out your lease, you will be responsible for paying the financier the difference.

Can you break a novated lease?

You can break a novated lease but it depends on which financier you have used for your novated lease. Ending your lease agreement is subject to the terms and conditions of your Novated Lease Agreement. If you choose to terminate your lease early, you will need to finalise any outstanding lease payments, including the residual payment and there may be penalty interest that you will be required to pay. This again depends on your financier and length of time remaining on your lease. If the market value of your vehicle is less than the amount required to pay out your lease, you will be responsible for paying the difference to the financier.

What is the residual balance on a novated lease?

A balloon payment, also known as a residual payment, is a payment required by the ATO at the end of the novated lease. These rates are set by the ATO depending on the lease term as a minimum percentage of the amount you purchased the car for.

You can choose to:
– Pay the balloon payment.
– Refinance the balloon payment as another novated lease.
– Sell the car and cover the balloon payments with the sale proceeds and get yourself into a new vehicle.

Can you have two cars on a novated lease?

Yes, you can. There is no limit to the number of vehicles you can salary package and take as
a novated lease. It all comes down to your salary and getting approval from your employer.

Do you own the car in a novated lease?

You don’t automatically own the car in a novated lease. During the term of your novated lease the finance company owns the vehicle and holds the title to the car. At the end of the lease, you’ll get the option to pay out the residual/balloon payment, take ownership, and drive away in your own car.

Do you actually save money with a novated lease?

Yes, you could save money with a novated lease. You don’t pay any GST on the purchase price and running costs of your vehicle. You also get access to fleet discounts, which you normally wouldn’t if you chose to buy the car yourself outright. Plus, our online calculator can show you how much you can save in income tax during the life of the lease.

This information may be regarded as general advice. That is, your personal objectives, needs or financial situation were not taken into account when preparing this information.

Accordingly, you should consider its appropriateness, having regard to your own objectives, financial situation and needs before acting on it.

What happens to excess funds at the end of a novated lease?

If your surplus funds are post-tax contributions, we’ll refund them to you in full. If they are pre-tax contributions, they’ll be handed over to your employer to be taxed before being deposited to your bank account. Our team will explain the available options.

How do I reach out in case of financial hardship?

If you are experiencing financial hardship please contact CarBon on 1300 113 477 to discuss available options.

Is there a km limit on a novated lease?

CarBon Novated Leasing offers flexible kilometre options to suit your driving needs, whether you’re a low-mileage driver or regularly on the road.

Can I lease a second-hand vehicle?

Yes, we offer leasing options for both new and pre owned vehicles, giving you more flexibility to find a car that fits your budget. With EVs if the vehicle was registered after 1 st July 2022 it is FBT exempt – provided it is underneath the LCT threshold. Used petrol vehicles must be less than 12 years at the end of the novated lease to qualify.

Can you pay for a novated lease using your car allowance?

Absolutely, in fact it makes more sense to get a novated lease if you have a car allowance.

This is because a car allowance is taxed like regular income. By getting a novated lease you are using the pre-tax dollars, in this case the full allowance to pay for the vehicle. This can potentially save you quite a bit of money in tax each year.

Will my car allowance cover the cost of my novated lease?

Leave this one to us! Your consultant will help you depending on your circumstances and crunch all the numbers so you get the full picture before making any decisions.

How long is a typical novated lease term?

Lease terms usually range from one to five years, depending on your preferences and financial goals. Most leases go for five years.

Can I use the dealership of my choice when getting a novated lease?

CarBon is incredibly flexible, we can procure your vehicle from the dealership of your choice.

I don’t want to include running costs in my novated lease, can I just do the finance only?

You can select to just do the finance only. Just be aware that packaging your running costs into your novated lease could potentially reduce your tax liability and boost your take home pay. This is why we normally quote with all the running costs included.

Can I buy a second hand car from a friend?

Yes, but we generally recommend avoiding private sales. Buying through a dealership ensures you access certain statutory rights and warranties that you’re entitled to. Private sales lack consumer protection and involve a lot more admin work for your financier to get it over the line.

Can I package a car that I already own?

Yes, you can. This is called a sale and lease back. We arrange for a finance company to buy the car from you and then we can package it up into a novated lease for you which allows you to access the tax benefits. Speak to one of our consultants for more information.

Can I package a car for someone else, like a family member?

Absolutely, sometimes it can be a good way to get your kids into their first car!

I run my own small business can I get a novated lease?

Yes, you can. All you need is for your business to be registered for 12 months, registered for GST and you need to pay yourself a salary.

Can I fill up with petrol anywhere I like?

Yes! Or you can use one of our fuel cards which gives you access to your fuel budgets.

Do I have to use the car for work?

No, you can use the novated lease however you like. If you do use it for work please let your consultant know as you could potentially save even more money especially if it is a petrol vehicle by using the operating cost method.

What is Fringe Benefits Tax (FBT)?

FBT is a way the Australian Tax Office (ATO) ensures non-cash employee benefits and perks are taxed fairly. Because a novated lease is paid for using pre-tax salary it is an employee benefit that is subjected to FBT. This is because a novated leases offers significant financial benefits and tax savings and the ATO needs to balance some of these savings by applying FBT to the lease.

Who pays FBT on a Novated Lease?

For a normal novated lease, the employer is responsible for paying FBT to the ATO. This doesn’t mean your employer is out of pocket on your lease. What happens is that this cost is factored into the lease agreement. So, the employee indirectly covers the FBT by making an after-tax payment to offset this.

How can I avoid paying FBT?

FBT is set as a 47% tax on 20% of the car’s base value irrespective of how much you drive. One easy way to avoid this is to get an EV as they are exempt from FBT depending on the price until 1st of April 2029. You can also use the Employee Contribution Method (ECM) to make some extra payments from your post-tax salary, this can reduce your FBT liability.

Another way to reduce a certain portion of your FBT liability is to check if your organisation is classified as a not-for-profit organisation, public or not-for-profit hospital or public ambulance service. There is a capped threshold, so a certain portion is FBT exempt. These thresholds are available on the ATO website.

One final way to reduce FBT liability is to choose a lower cost car. As FBT is calculated on the value of the car a cheaper option results in less tax being paid.

What is the FBT year and how does it impact me?

The FBT year runs from 1st of April to the 31st of March of the following year. This is the period the ATO uses to assess the taxable value of the non-cash benefits that organisations provide for their employees. CarBon will guide your organisation through the reporting liability for all the novated leases it manages and provide all the information required by the ATO.