Common Myths About Novated Leases

30 August 2013

Novated leases are becoming increasingly popular due to their ease, flexibility and associated tax benefits. However, there are still some glaring misconceptions amongst consumers. These are the most common myths about novated leases that seem to crop up time and time again.

Novated Leases: Only for the Rich?

This is probably the most commonly mentioned myth that is simply untrue. Contrary to popular belief, you do not need to earn at least $70,000 per year to benefit from novated leases or anywhere near it for that matter. In actual fact, as long as your individual tax rate is below the Fringe Tax Benefit rate you’re in business. While it is true that those with higher income levels can potentially save more money, it doesn’t mean that it’s not worth getting otherwise - however it is still very much on a case by case basis.

Too Risky for Young People

This is another myth that is stopping young people from saving money. All you need is a valid driver’s licence, a full-time income and your employer also has to allow you to participate in salary packaging. There are no age restrictions whatsoever.

Only Worthwhile For Heavy Use

Most people think that it’s only worth opting for a novated lease if you’re planning on heavy vehicle use. In actual fact, changes to FBT legislation in 2011 means that everyone can benefit from this type of lease. The flat (statutory) rate of 20% can apply irrespective of how much you actually drive your car. It’s possible to save a hefty chunk of money even if you drive less than 10,000 km per year. Of course, higher use drivers can utilise the operating cost method of calculating FBT to ensure they maxinimise their benefit.

Strictly for Business Use


Fringe Benefits Tax (FBT) is charged based on the personal usage of each vehicle whereas business use is not. While plenty of people think that novated leases are only for heavy business use, the statutory method of calculating FBT simplifies the accounting process for FBT and limits the personal usage to a flat 20%. You don’t need to worry about a logbook or records either.

It’s Too Complicated
While it may be true that it’s not the most straightforward process to get your head around, the fact is that you won’t be doing any of the heavy lifting. The company that will be in charge of your novated lease will take you through the entire process and you will have very little to worry about. All you need consider is the monthly repayment amounts, which also include running costs. It can’t get much simpler than that!

Novated leases give most employees countless advantages over any potential downsides. In any case, most of these objections are misconceptions and you should find that you can save a lot of money by taking the plunge!