Novated Lease GST Savings Explained | NLA | Novated Lease Australia

A novated lease is usually best known for helping individuals to save on income tax. What’s perhaps less well known is that the overall cost-effectiveness of a novated lease is significantly boosted by GST savings.

How do GST novated lease savings work?

You’ll save money in GST on a novated lease based on both the upfront purchase of the vehicle you lease and the ongoing running expenses. Here’s how:

Novated lease GST saving on vehicle purchase price

There will be a GST discount on the purchase price of the vehicle you choose for your novated lease. That’s because under a novated lease, you do not purchase the vehicle initially.

Instead, the company providing the lease finance purchases your choice of car on your behalf. The finance company can claim a credit for GST paid on the purchase of the vehicle and you benefit from this. Effectively this means your novated lease payments are based on the purchase price of the vehicle with a large GST discount or potentially no GST at all.

In other words, the GST discount the finance company can claim on the vehicle is passed on to you.

The maximum novated lease GST discount on the vehicle purchase price is $6,334 for the 2025/26 financial year. The means vehicles valued up to $69,674 are effectively GST-free. For vehicles valued above that, GST will only apply to amounts above $69,674.

Novated lease GST saving on packaged car running costs

One of the other benefits of a novated lease is that there’s also GST saving on car running costs you salary sacrifice. With a novated lease, most related costs like fuel or charging, insurance, servicing and rego can be packaged as part of your lease. You pay for them through the single regular payments that’s deducted from your salary.

Again, because you are not purchasing these items yourself (they are technically paid for by your employer as part of your remuneration) there is a GST discount. Effectively that means a 10% saving on eligible car running costs you salary sacrifice as part of your novated lease pre-tax. That’s in addition to the potential income tax saving by salary packaging those costs.

You can use our novated lease calculator to estimate your potential GST and other savings.

Novated lease GST saving example


Standard vehicle purchase price	$64,014
Up front novated lease GST discount	-$5,518
Weekly lease cost (includes car running costs)	$215.87
GST discount on lease package	$31.80/week
Total GST saved on your car running costs over 5 years	$1,653.60
Total GST saved over the life of the lease (car purchase cost and running costs)	$8,268
*The example above is based on 10,000km driven per year, over a five-year novated lease term. Running costs and GST savings are based on an electric vehicle purchased in the 2025/26 financial year that qualifies for the fringe benefits tax exemption on eligible low and zero-emission vehicles in Australia. Running costs include: electricity, comprehensive insurance, registration and CPT, servicing and tyres. This is an example for illustrative purposes only based on the assumptions described. Your costs and savings may be different depending on your situation.

Do you pay GST on a novated lease?

In some cases, novated leases are effectively GST-free, but there are some circumstances when part of the GST cannot be deducted and will be reflected in the cost of your lease.

If the purchase price of the vehicle is more than $69,674 (for the 2025/26 financial year), GST will be payable on the purchase price above that amount.
GST will apply as normal on any costs (e.g. running costs) covered using after-tax salary as part of your novated lease. These are costs paid for using the employee contribution method which is designed to offset fringe benefits tax (FBT) on the lease. However, for FBT-exempt leases, 100% of your lease costs can be made pre-tax with a GST discount. This is the case for eligible EV novated leases.
The residual value of your novated lease (payable at the end of the lease) will include GST.

The important thing to remember is that a novated lease is generally the only way for an individual to pay for a car for personal use with any sort of GST discount.

It’s one of the the main sources of savings for a novated lease versus a car loan, or even a novated lease vs buying the car outright with cash. Paying for a car through these other methods typically does not deliver any GST saving.