How do Novated Leases Affect Fringe Benefits Tax (FBT)?

Vehicles purchased through novated leasing arrangements are still subject to Fringe Benefits Tax at the grossed-up value of the benefit.

FBT consequences of novated leasing

Arranging a novated lease can be a cost-effective way to pay for a new car through salary sacrifice arrangements, using a portion of your pre-tax salary to avoid paying more in GST. However, like other fringe benefits, your novated lease is subject to FBT. In the case of employees arranging a novated lease through their employer, the employer will usually take over the lessee’s rights and obligations, including payment of FBT.

Calculator and Pen

How FBT is calculated

For the purposes of fringe benefits, a car is defined as any station wagon, sedan, panel van or ute for private use or transport vehicles and goods-carrying vehicles for commercial use up to a certain capacity. Cars purchased through a novated lease may still be defined as private use vehicles if they are made available for the employee’s use by employers. FBT is calculated based on the grossed-up value of the novated lease vehicle, which ensures it has the same value as the after-tax salary of the employee. If FBT is calculated according to the statutory fraction method, the total number of kilometres travelled will need to be taken into account, along with the duration of the lease.

Novated leasing in Geraldton

Call us on 08 6555 3854 to find out more about novated leasing and how to salary sacrifice in Albany and Perth or across Australia.