Novated Lease Employer Guide
Offer Salary Packaging to Your Team

Why Offer Novated Leasing to Your Employees?

In a competitive employment market, the benefits you offer can be the difference between attracting top talent and losing candidates to competitors. Novated leasing is consistently ranked as one of the most valued salary packaging benefits in Australia, and since the introduction of the EV FBT exemption in July 2022, employee demand for novated leases has surged.

Here is why forward-thinking employers are making novated leasing available to their teams:

1. Attract and Retain Top Talent

Salary packaging is a powerful recruitment and retention tool. Candidates actively seek out employers who offer novated leasing, and existing employees are more likely to stay with an employer that provides meaningful financial benefits. In the public sector, health, and education industries, salary packaging has long been standard practice. Now, private sector employers are increasingly offering novated leasing to remain competitive in the talent market.

The EV FBT exemption has amplified this effect. Employees can save $8,000 to $15,000+ per year by salary packaging an electric vehicle — savings that are only possible through an employer-facilitated novated lease. By offering this benefit, you give your team access to significant financial advantages they cannot obtain on their own.

2. Zero Cost to Your Business

Unlike other employee benefits such as subsidised health insurance, gym memberships, or company cars, novated leasing costs the employer nothing. The entire arrangement is funded from the employee’s pre-tax salary. The employer’s role is limited to facilitating the payroll deductions and remitting them to the novated lease provider. There are no employer contributions, no additional insurance costs, and no financial risk if the employee leaves or defaults on the lease.

3. Simple Administration

Setting up and administering novated leases is straightforward. Once the initial salary packaging policy is in place (we provide templates and guidance), the ongoing administration involves processing the scheduled payroll deductions — something your payroll system likely already supports. We handle all employee-facing activities including quoting, finance approval, vehicle sourcing, running cost management, and end-of-lease transitions.

4. No Employer Liability

Under a novated lease, the three-way agreement (deed of novation) clearly defines the responsibilities of each party. The employer’s obligation is limited to making the salary deductions during the employee’s tenure. If the employee leaves, the obligation reverts to them personally — the employer has no ongoing liability for the lease, the vehicle, or any associated costs.

5. Enhanced Employee Satisfaction

Employees who salary package their vehicles consistently report higher satisfaction with their total remuneration package. The tangible, ongoing savings delivered by a novated lease (visible in every payslip) reinforce the value of working for an employer that provides meaningful benefits beyond base salary.

How to Set Up Novated Leasing for Your Organisation

Implementing novated leasing in your organisation is a straightforward process. Here is a step-by-step guide for HR managers, payroll teams, and business owners:

Employer Compliance and Obligations

While novated leasing is administratively light for employers, there are specific compliance obligations you need to be aware of. Understanding these obligations ensures you manage the arrangement correctly and meet your regulatory requirements.

Payroll Tax

In most Australian states and territories, novated lease deductions are subject to payroll tax as they form part of the employee’s total remuneration. However, the treatment varies by jurisdiction, and some states provide exemptions or concessions for salary-packaged vehicles. We recommend confirming the payroll tax treatment with your accountant or the relevant state revenue office.

Fringe Benefits Tax (FBT) Reporting

As the employer, you may need to report novated lease fringe benefits. For conventional vehicles where FBT is managed through the Employee Contribution Method (ECM), the FBT liability is effectively offset by the employee’s post-tax contributions, resulting in nil or minimal FBT payable. For FBT-exempt electric vehicles, there is no FBT to pay. However, the reportable fringe benefit amount may still need to be included on the employee’s income statement.

Our team provides you with the necessary FBT figures and reporting information for each novated lease participant, simplifying your FBT compliance.

Superannuation Considerations

In a standard salary packaging arrangement, the novated lease deduction is made from the employee’s salary after superannuation is calculated on the full gross amount. This means the employee’s superannuation is not reduced. However, some employment contracts calculate superannuation on the base salary only (excluding salary sacrifice amounts). Clarify the superannuation treatment in your employment agreements to ensure compliance with the Superannuation Guarantee.

Deed of Novation

Each novated lease requires a deed of novation — a legal document signed by the employee, employer, and finance company. This deed sets out the rights and obligations of each party, including the salary deduction schedule, what happens if the employee leaves, and the employer’s limited liability. We prepare the deed of novation and manage the signing process.

Employee Termination Procedures

When an employee with a novated lease leaves the organisation, you need to:

• Notify us of the employee’s departure date
• Cease the salary deductions from the final pay
• Process any final deductions or adjustments as advised by us
• We handle all communication with the departing employee regarding their lease options

The employer has no further obligation once the employee has departed and final deductions have been processed.

Novated Leasing for Small Businesses

Small businesses often assume that novated leasing is only for large organisations, but this is not the case. Businesses of any size can offer novated leasing, and it can be particularly effective for small businesses that want to compete with larger employers on benefits without the associated cost.

For small businesses, the key considerations are:

• Payroll system capability — ensure your payroll system can process salary sacrifice deductions (most modern systems like Xero, MYOB, and KeyPay support this)
• Salary packaging policy — you need a formal policy document (we provide a template suitable for small businesses)
• Employee eligibility — the employee must be a PAYG employee with sufficient income to service the lease
• No minimum employees — you can offer novated leasing to a single employee or your entire team

How to Promote Novated Leasing to Your Team

Once you have set up novated leasing, effectively communicating the benefit to your employees is key to adoption. Here are proven strategies for promoting novated leasing within your organisation:

• Company-wide announcement — send an email or internal communication introducing novated leasing as a new benefit, highlighting the potential savings (especially for EVs)
• Information sessions — we can conduct in-person or virtual information sessions for your team, explaining how novated leasing works and answering questions
• Onboarding materials — include novated leasing information in your new employee onboarding pack so new hires are aware of the benefit from day one
• Calculator access — share a link to our novated lease calculator so employees can estimate their personal savings
• Success stories — with permission, share testimonials from employees who have benefited from novated leasing

Why Partner With Us?

We make it easy for employers to offer novated leasing by handling everything beyond the payroll deductions. Here is what we provide at no cost to your organisation:

• Complete employee management — we handle quoting, finance approval, vehicle sourcing, insurance, running cost budgets, and end-of-lease transitions
• Salary packaging policy template — a ready-to-use policy document tailored to your organisation
• Employee communication materials — brochures, FAQ documents, and digital resources to promote the benefit
• Information sessions — virtual or in-person presentations for your team
• FBT reporting support — we provide all necessary figures and guidance for your annual FBT reporting
• Payroll guidance — step-by-step instructions for setting up deductions in your payroll system
• Dedicated account manager — a single point of contact for all employer-related enquiries
• Multiple finance providers — we compare quotes from multiple novated lease providers to ensure your employees get the best deal

Get Started Today

Setting up novated leasing for your organisation is quick and easy. Contact us to discuss your requirements, and we will guide you through the setup process from policy creation to payroll configuration. There is no cost, no commitment, and no minimum employee count. Your team could be saving on their next car within weeks.