Frequently Asked Questions

Salary packaging is an ATO approved way of paying for certain items before you pay income tax. The result is that you pay less income tax and increase your take-home pay.

In Australia, the Australian Tax Office (ATO) sets guidelines for what can be included in a salary packaging arrangement. Some of the most common benefits that can be salary packaged include:

• Meal and entertainment expenses
• Housing and rent expenses
• Vehicle expenses, such as servicing or car lease payments
• Loan and Credit card payments

It’s important to note that some benefits may be subject to Fringe Benefits Tax (FBT) and that there are limits and restrictions on the type and amount of benefits that can be salary packaged. It’s best to consult with a financial advisor or tax professional to determine the best salary packaging options for your individual circumstances.

The amount you can salary package depends on a variety of factors, including the type of employer you work for, the specific benefits you choose to include in your salary packaging and the Fringe Benefits Tax (FBT) year, which runs from April 1st to March 31st.

A capped benefits refers to the Fringe Benefits Tax (FBT) exemption that is available to certain employer types, which allows employees to salary package certain benefits (such as living expenses, mortgage, rent, credit card payments, utility bills and groceries) up to a set limit without paying FBT.

They essentially provide employees with the opportunity to reduce their taxable income by directing a portion of their salary into certain expenses, all while enjoying a set limit on the amount they can salary package without having to pay FBT. This results in a higher take-home pay for employees and more disposable income!

Cap limits refer to the total amount that employees can salary package for certain benefits without having to pay Fringe Benefits Tax (FBT). These limits vary based on the type of employer an employee works for.

There are three different types of employers:

• Health Employees (Public Hospitals, Ambulance Services): These individuals have the option to salary package up to $9,010 for living expenses and up to $2,650 for meal entertainment.
• Charities and Public Benevolent Institutions: Employees in this sector can choose to salary package up to $15,900 for living expenses and up to $2,650 for meal entertainment.
• Private Education and Rebatable Employers: These employees are eligible to salary package up to $15,900 towards living expenses on a concessionally taxed basis, and up to $2,403 for meal entertainment on a concessionally taxed basis.

In addition to these capped limits, employees may also be able to salary package additional benefits, such as a novated lease for a vehicle, work-related expenses, and other benefits that do not attract FBT.

Salary packaging allows you to save on income tax that you would otherwise pay on a variety of everyday expenses. Salary packaging reduces your taxable income so that you pay less tax, resulting in an increase to your take-home pay and more money in your pocket!

Based on your employer and the benefits you select; you may need to provide some documents such as a valid a tax invoice and proof of payments to start packaging.

Popular ways of claiming salary packaging benefits include:

• Ongoing/regular payments: This option is perfect if you have expenses that occur on a regular basis, such as mortgage/rent or utility bills.
• Salary Packaging Cards: This option allows you to have your salary packaging benefits loaded onto a card that you can use just like a regular debit or credit card. This is a great option for things like groceries or other everyday expenses.
• Reimbursement: If you’ve already paid for an expense out of pocket, you can submit a reimbursement request to get your money back. This option is great for work-related expenses or other one-off costs.

As salary packaging is a benefit provided to you by your employer, you will need to confirm with us or your organisation whether casual employees are eligible to salary package.

The FBT exemption removes the fringe benefits tax that would normally apply to a salary-packaged or novated lease vehicle.

• FBT is usually paid by employers on non-cash benefits provided to employees.
• With a petrol or diesel car lease, a portion of the lease payments is taken pre-tax, while the rest comes from after-tax salary to offset FBT.
• However, eligible electric vehicles are fully exempt from FBT, meaning the entire lease payment can be made pre-tax, increasing tax savings for employees.

As a result of the FBT exemption, on a typical $60,000 EV this can result in a savings of around $5,000 or more per annum.

From April 1 2025, only battery electric vehicles qualify for this exemption.

To be eligible the car must have both been held and used on or after 1 July 2022.  The exemption applies to battery electric passenger vehicles that can carry a load of less than one tonne and are under Luxury Car Tax fuel efficient threshold of $91,387.

Normally, with a novated lease, you pay Fringe Benefits Tax (FBT) on the vehicle, which is a tax that employers pay on benefits provided to employees. For petrol or diesel cars, some of the lease payments are made from your pre-tax salary, and the rest from after-tax salary to account for FBT.

However, electric vehicles under $91,387 are exempt from FBT, meaning your entire car payment can be made from your pre-tax salary, significantly reducing your taxable income and increasing savings. This makes EVs an even more cost-effective option when using a novated lease.

Absolutely! You can package the cost of electricity for your electric vehicle (EV) as part of your novated lease. To do so, you’ll need to install a smart meter to measure the electricity used by your EV or set up a dedicated in-home charger with a metering function. This allows you to include the electricity costs in your lease package, helping you save on taxes and manage your expenses more efficiently.

Novated leasing is an increasingly popular and efficient form of car financing, approved by the Australian Taxation Office, that has been around for decades.

With employer support, workers can use pre-tax income to cover vehicle lease payments and running costs like registration, insurance, and maintenance—reducing taxable income. This means workers can keep more of their tax home pay that they’ve worked hard for.

Off the back of a cost-of-living crisis, and due to the FBT EV exemption, more Australians than ever before are experiencing a novated lease, a cheaper, more efficient way to own a car.

An employer deducts money from a worker’s pre-tax income to cover lease payments and running costs like fuel, insurance, tyres, and registration. This reduces your taxable income meaning you’re receiving more of your hard-earned income rather than it going to the tax man.

With a novated lease, you avoid GST on both the car’s purchase price and running costs, meaning a $50,000 car instantly saves you $4,545 in GST.

There are no large upfront costs, and everything can be bundled into predictable fortnightly payments, making it a simple and effective budgeting tool.

The best term for a novated lease depends on your financial goals and personal preferences. Shorter terms generally have higher payments, but they allow for quicker vehicle upgrades, while longer terms spread the costs over time, offering lower monthly payments. It’s important to choose a term that aligns with your budget and how often you plan to change vehicles.

The best term for a novated lease depends on your financial goals and personal preferences. Shorter terms generally have higher payments, but they allow for quicker vehicle upgrades, while longer terms spread the costs over time, offering lower monthly payments. It’s important to choose a term that aligns with your budget and how often you plan to change vehicles.

If you decide to exit a novated lease early, you’ll typically need to cover:

• Remaining Lease Payments: All outstanding monthly payments still due under the lease contract.
• Residual Value (Balloon Payment/Final Payment): The estimated value of the vehicle at the end of the lease. If you want to keep the car, you’ll need to pay this amount. If you don’t want to keep the car, you typically don’t have to pay the residual value. Instead, you would return the car to the lease provider, and the residual value becomes part of the final settlement process but you will be responsible for other costs.
• Early Termination Fees: Many lease agreements include fees for breaking the contract early, which can significantly increase the total cost.

Unlike other forms of finance, such as a car loan, a novated lease offers several options at the end of the lease term:

1. Pay off the residual to own the vehicle.
2. Renew the lease for a longer term, either with the same vehicle or by upgrading.
3. Sell the car and pay the residual value to the financier.

This flexibility allows you to choose the option that best suits your needs at the end of the lease.

With a regular car loan, you’d be making repayments with your post-tax salary. 
 With a novated lease, your payment uses some of your pre-tax salary, which lowers your taxable income. Plus all your running costs are bundled into one regular, easy, automatic payment.

A residual payment (also known as a balloon payment) is the amount you need to pay at the end of your novated lease if you choose to own the vehicle. The amount is calculated based on tax rules and the portion of the vehicle’s value that was financed. It depends on factors such as the lease term and the estimated value of the car when the lease ends. This payment is usually due when you decide to purchase the car after the lease term concludes.

Yes, there are some restrictions. You can’t lease a car that is designed to carry more than one tonne (about the weight of a small elephant or hippo) or vehicles that can carry nine passengers or more. These types of vehicles don’t meet the criteria for a novated lease.

The interest rate varies between providers and you should check this with their provider. NALSPA isnt directly involved in the commercial rate arrangements of its members. Whilst not required, many providers already disclose the applicable rate – and if they don’t you should ask that of your provider.

Unlike banks, which primarily offer online-only applications with minimal customer support, NALSPA members provide a comprehensive, service-driven experience tailored to employer requirements. Many employers select NALSPA providers based on strict service, compliance, and efficiency standards, ensuring employees receive end-to-end support throughout the leasing process. They are selected by employers based on a much wider and more stringent set of criteria.

Additionally, NALSPA members specialise in handling high application volumes with fast turnaround times while offering access to multiple financing options. Banks have not been appointed to most employer funding panels because they do not meet such high service standards. Due to these added benefits and the higher level of service, the interest rates may differ from those of traditional banks. However, the overall value proposition—including tax benefits, convenience, and fleet discounts—often results in a more cost-effective solution for employees.

In short: Interest rates through a novated lease via a novated lease provider are generally higher than through a personal bank loan as the NL provider works with you through the full term of the lease to manage your lease, the running and maintenance of the vehicle, and the associated tax compliance obligations and reporting. You are getting a more comprehensive service while reducing your taxable income.

Break costs vary by financier but are generally designed to recover the present value of the remaining lease obligations. Some providers may charge additional fees, while others do not. When comparing similar financing structures, there is no clear evidence that novated lease break costs are higher than other forms of finance. However, unlike personal loans—which amortise to a zero balance—novated leases may have residual values, which can make the financial impact of early termination seem higher.

Novated lease providers typically charge employees a small monthly administration fee that reflects the cost of ongoing budget management for the customer for running costs. Novated lease providers are typically remunerated by financiers at a level designed to help recover the significant up-front costs incurred by providers in arranging novated lease finance. The quantum of such remuneration typically varies depending on term of the novated lease and cost of the vehicle being financed.

Novated lease providers typically charge a management or administration fee to cover the costs of handling the lease, compliance, and associated administrative tasks. This fee is usually included in the regular lease payment, ensuring a seamless experience without additional out-of-pocket expenses. Please ask your provider to detail and explain all fees and charges.

Novated leasing is used by employees across all income levels and industries, including teachers, nurses, aged care workers, and miners. No matter how much you earn, as long as you pay tax, you can benefit from novated leasing due to the tax savings. For example:

• An employee earning $80,000 a year who leases a $40,000 car and drives 15,000 km per year could reduce their taxable income by around $2,500 annually.
• Someone earning $180,000 a year with the same car and mileage could save an extra $400 per year.

This means lower- to middle-income earners often see greater tax savings relative to their income, making novated leasing an attractive option for a wide range of workers.

1. As with any financial commitment it’s important to understand what you are signing up to including the fees and costs included.
2. Be sure that the vehicle is right for you and that the re-payments are affordable and within your budget
3. Lease Term and Residual Value – the duration of your novated lease affects the overall benefits and cost. Shorter lease Terms: Typically have larger monthly payments but less interest over the life of the lease. Longer Terms: Offer lower monthly payments but can result in higher overall interest costs across the term.
4. Employment Status and Job Security – a novated lease is tied to your employment so changing jobs can affect your lease arrangement. So if you are about to change jobs it’s a good idea to check with your prospective employer that they offer novated leasing arrangements
5. We always recommend that you seek independent financial advice before entering a novated lease.