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Novated Leasing Mythbusters!

There are many myths associated with Novated Leases that create confusion and false representations on what benefits the product can bring. Here we decided to take a look at some of the common misconceptions associated with Novated Leases:

The Truth


  1. You have to pay Fringe Benefits Tax (FBT)

False! Whilst traditional forms of Salary Packaging can attract FBT, ProNovate clients avoid this hefty tax bill thanks to an intelligent method of packaging your vehicle and running costs.

Known as the ‘Employee Contribution’ method, any potential FBT liability is reduced to nil due to a portion of your salary sacrifice payments coming out of post-tax wages. To do this we calculate what your Fringe Benefit Value would be, and instead of paying this as FBT, the Employee contributes this amount directly into their repayments from their post-tax salary.

The best part is that this process is managed by ProNovate and all you need to do is just enjoy driving your car!


  1. You have to travel at least 25,000km’s to make it worthwhile

False! This is a myth which is derived from old methods of calculating FBT on leases. This process was simplified by the tax office in the last few years which means it does not matter how far you travel, you can still stand to save thousands every year on your Novated Lease.

In addition, there are no longer any kilometre target requirements for you to travel, so you do not need to worry about reaching any odometer targets and can drive the car as for a long (or as little) as you like.


  1. You have to be on a high salary

False! The purpose of a Novated Lease is to reduce the amount of tax you pay through ‘salary sacrifice’. This often results in a common misconception that to receive tax benefit, you need to on a high tax bracket. This is simply not true, and anyone who currently pays tax, no matter their rate, still stands to receive significant tax savings through the Novated Lease. For example, $4,000 annual tax benefit is just as significant for someone earning $60,000 per year, as a $6,000 saving is for someone earning $200,000.


  1. You have to use the vehicle for business purposes

False! Even though the Novated Lease involved your employer who will package the vehicle for you through your pre-tax salary, there is no requirement for you to use the vehicle for business use. In fact, it is common for people to place multiple vehicles from within their household on a Novated Lease, so even the daily driver for school runs can enjoy the benefits of a Novated Lease!


  1. You need a car allowance

False! Given that the vehicle can be used for 100% private use, there is no requirement for you to have a car allowance as part of your salary package. The Novated Lease can be packaged through any form of an Employee’s taxable wages.

If you would like to find out more about the truths behind Novated Leasing, get in touch:

Call 1300 000 PRO (776) or email

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