The community mailbag: Answering your top 3 questions this month

1. What happens to my lease if I change jobs?

This is easily the number one question we get from people considering their first novated lease. It's a common misconception that signing a lease permanently ties you to your current employer for the next three to five years.

The short answer is: you take the car with you.

When you leave a job, the vehicle and the finance obligation remain yours. The lease is simply “de-novated” from your old employer, meaning the payments temporarily stop coming out of your pre-tax salary. From there, you have a few options. The most popular route is to transfer (or “re-novate”) the lease to your new employer, assuming they offer a novated leasing programme. The set-up is straightforward, and you simply resume making your bundled payments from your new salary.

If your new employer doesn't facilitate novated leasing, or if you decide to take a break from working, you can continue paying the lease directly from your post-tax bank account, or you can choose to pay out the remaining finance on the car entirely. You're never trapped.

2. Can I get a novated lease on a used car?

Yes, absolutely! While novated leases are famous for getting everyday Australians into brand-new, FBT-exempt electric vehicles, you can definitely lease a used car. In fact, doing so can be a fantastic way to stretch your budget even further while still enjoying the tax benefits.

There are just a few basic ground rules. Most financiers require that the car won't be older than a certain age by the end of your lease term (usually around 10 to 12 years old). So, if you're signing a five-year lease, the used car generally shouldn't be more than five to seven years old at the time of purchase.

You can buy the car from a traditional dealership or even through a private sale. Leasing a used car still allows you to bundle all your running costs—like fuel, insurance, servicing, registration, and tyres—into one regular, tax-effective payment.

3. Do I have to drive a lot of kilometres to make it worth it?

Years ago, the fringe benefits tax (FBT) rules were structured in a way that heavily rewarded people who drove huge distances. The more you drive, the lower your tax rate. Because of this, an old myth still circulates on internet forums that a novated lease is only worth it if you are a sales rep or an extreme commuter.

That rule was completely scrapped over a decade ago.

Today, the statutory fraction method used to calculate FBT is set at a flat rate of 20%, regardless of whether you drive 5,000 km or 50,000 km a year. You still get the financial benefits of paying for the car and its running costs with your pre-tax income, which lowers your overall taxable income.

Plus, if you're leasing a fully electric vehicle under the FBT exemption limit, you pay zero FBT anyway. Whether the car is a dedicated road-trip machine or just a weekend runabout, the tax savings make sense for almost any driving profile.