Novated Leasing with RemServ: A Comprehensive Guide

Key takeaways  

If you’re ready for a new car, chances are you’re looking at spending your hard-earned savings or taking out a loan.

Or perhaps you’re considering drawing down on your mortgage.

There is another option – and one that’s enjoyed by tens of thousands of Queenslanders each year – novated leasing.

To help you determine whether it is indeed the right choice for you, we’ve pulled together a comprehensive guide to all things novated leasing.

What is a novated lease?

A novated lease could be the smarter, quicker way into your next car that you’ve been looking for – whether that’s upgrading your existing model or making the switch to electric.

It’s a three-way agreement involving employee, employer and a financier. It’s a unique form of financing that lets many Australian drivers pay for a new, used or existing car and its eligible running costs using a portion their pre-tax salary.

How does novated leasing work?

Here’s a quick breakdown of who does what:

• You choose and use the car.
• Your employer agrees to make lease payments on your behalf with a combination of before- and after-tax dollars (or fully before-tax for eligible EVs)
• The financier owns the car and leases it to you.

With budget convenience and potentially significant tax savings, it's a valuable employee benefit and retention tool for organisations.

Considerations for taking out a novated lease include the residual (or “balloon”) payment due at lease end, and the potential for a Reportable Fringe Benefits Amount (RFBA) to be reported on your tax return, which could impact income tests for HECS, child support, and family benefits.

Is a novated lease the same thing as salary packaging a car?

Yes, a novated lease is a form of salary sacrifice; an employee benefit arrangement involving you, your employer and a financier that can last between one and five years.

The key differences between novated leasing and other forms of finance is the ability to pay for the car and some of your eligible running expenses with pre-tax dollars; the potential to save GST on the car’s purchase price as well as some running costs; as well as spreading the car’s expenses over the course of a year rather than have to stump up cash for big bills like registration when they fall due.

Potential Tax Savings

With its unique employer-employee-financier arrangement, a novated lease allows for your payroll department to deduct an agreed amount from your earnings to cover the car’s finance repayments and running costs.

But because some of this money is taken before you are taxed on it, you don’t have to pay income tax on that portion of your income (with eligible electric vehicles, all your payments could be pre-tax). This could reduce your taxable income – and mean more money for you to spend on other things.

Best of all, because your repayments are partly sourced from your before-tax income (or fully sourced for eligible EVs), you could end up paying less tax.

After-Tax Payments

Because a novated lease is treated by the ATO as a benefit outside normal cash salary or wages, it is subject to what is known as Fringe Benefits Tax (FBT). To help offset the FBT liability, your deductions can be set up to include a portion of post-tax salary. This is known as the Employee Contribution Method (ECM). The ECM reduces the taxable value of the car, and in turn reduces your FBT liability. (Eligible electric vehicles up to the Luxury Car Tax (LCT) threshold of $91,661, however, are FBT-free.)

Electric vehicle novated leases

Because of the FBT exemption available under the Australian Government’s Electric Car Discount, novated leases on eligible EVs differ from those for fuel-powered cars, because there is no post-tax component to deductions.

With 100% pre-tax payments permitted on eligible electric cars – up to the Luxury Car Tax (LCT) threshold of $91,661* – this could mean making similar payments on EVs to an equivalent petrol car retailing for considerably less.

Access to RemServ’s nationwide dealer network

With a novated lease, you're not limited to any particular car type, model or make, unless stipulated by your employer – whether it’s petrol or electric, or a new, used, or even your existing car.

As one of Queensland’s leading novated leasing providers, RemServ has an extensive network of preferred dealers to tap into, to help you get a great car deal. In most cases, you’re free to choose the car you wish to lease – whether it’s petrol or electric, or a new, used or even your existing car.

Check out our Vehicle Offers page, or give one of our consultants a call to see what we can do for you.

Budget Convenience

Car expenses pop up throughout the year – and often when you least expect or want them. With a novated lease, your selected maintenance and running costs are conveniently budgeted for with funds set aside from your salary each pay. These can cover costs such as:

• Lease Payments
• Registration
• Servicing
• Maintenance
• Insurance
• Fuel
• Tyres
• Car washes
• Electricity (for EVs)

Before your lease begins, we’ll work with you to nominate your annual running costs, the total of which is deducted evenly from your pay across the life of your lease. If you’re paid weekly, the costs will be spread over 52 pay runs; fortnightly, 26 pay runs; monthly, 12 pay runs.

As vehicle expenses occur, RemServ will arrange payment using your payroll deductions. If you’re spending more or less than the pre-budgeted amount for any of your costs – for example, if you’re not driving as much, so you need to lower your fuel budget – you can adjust your pre-budgeted amount at any time.

GST Savings

With a novated lease, you would save GST on the purchase price of a new car up to the annual car limit (currently $6,334 for FY2025-6). This may save you thousands in upfront costs you would otherwise have to pay (this could mean, for example, a saving of $3,000 on a car with a purchase price of $33,000!)

Fully Maintained vs Self-Managed: It’s Your Choice

There are a number of different types of novated leases, however the two most popular are Fully Maintained and Self-Managed.

Fully Maintained Novated Lease

With a fully-maintained lease, RemServ will assist you in all steps of the process – from sourcing the vehicle, to negotiating on price, to arranging finance and establishing a budget for your running costs. RemServ will also set up your pay deductions and arrange these deductions with your employer.

You may also be issued a fuel card, so you don’t have to worry about getting reimbursed for fuel. You’ll also have the peace-of-mind support of RemServ’s experienced maintenance team dealing with your mechanic directly when it’s time for a service, to ensure costs and work undertaken are fair and reasonable.

Self-Managed Novated Lease

As with a RemServ Fully Maintained Novated Lease, RemServ will assist you in all steps of the process – from sourcing your vehicle, and negotiating on price, to arranging finance and establishing a budget for your running costs. RemServ will also set up your pay deductions and coordinate these arrangements with your employer.

You may also be issued a fuel card, so you don’t need to submit claims for fuel reimbursements. For all other running costs, you pay the provider directly and claim reimbursement from your salary packaged funds by submitting via the My RemServ. You will be responsible for managing your ongoing budgets, and ensuring there are sufficient funds available in your salary packaging account to cover your expenses.

End-of-Lease Options

You have a number of options at the end of your lease. These include:

• Trading in your car and using the proceeds to pay the residual amount (more about this below), then begin a new lease on a new car.
• Re-leasing the car – that is, begin a new novated lease to pay the residual amount. You keep the car you have on lease and RemServ works with you to establish a new lease and budget.
• Pay the residual amount and keep the car.
• Sell the car and pocket any excess funds from the sale after paying the residual amount.

Residual Payment

It’s legislated that there must be a ‘residual – or “balloon” – payment at the end of the lease. This means that you don’t make lease payments for the whole car amount over the term of a novated lease. The amount that you don’t pay is residual, and this is owed at the end of the novated lease.

The Australian Tax Office stipulates the percentage of the residual based on the term of the lease. For example, if you have a novated lease for four years, with a car finance amount of $30,000, the minimum residual is 37.5% or $11,250.

Does anyone qualify for a novated lease?

Many employers offer novated leasing as part of their employee benefits program, but eligibility can depend on your employer’s individual policy. Full-time and part-time employees are usually eligible, while casual employees often are not due to fluctuating income.

If you have any queries regarding eligibility, it is best to speak with your human resources contact.

Can you modify a novated lease car?

Extras or upgrades – including bull and tow bars, and window tinting – must be included in your initial vehicle quote and bundled into the total novated lease finance amount. It’s important to note that the car cannot be modified once the lease is active.

What are the steps to getting a novated lease?

With more than 25 years’ experience as one of Queensland’s leading novated lease providers, RemServ are experts in simplifying the process. Before you can get behind the wheel, RemServ’s six-step process is as follows:

1. Ask your employer if they offer novated leasing
2. Crunch the numbers and get a quote
3. Choose the car you want
4. Get finance approval
5. Sign the lease documentation
6. Settle the lease and have your car delivered

Check out this article for a detailed step-by-step guide to getting a novated lease.

Crunch the Numbers for Yourself

If you’ve got a ballpark figure for what you want to spend on a new car, RemServ’s novated leasing experts are ready to crunch the numbers and see which popular makes and models match your budget. Or you could put our novated lease calculator to the test to see how a novated lease might cost (or potentially save) you.

Novated Leasing with RemServ

Novated leasing can seem complex, but that’s why RemServ are here: to handle the complexity for you. Want to know more about novated leasing? You can read our FAQs here. Or if you’re ready to set the wheels in motion, contact us.

*The Fringe Benefits Tax Exempt Method is only used for eligible electric vehicles under the luxury car tax threshold of $91,661.

**GST savings may apply to the purchase price of a vehicle financed through a novated lease up to the annual car limit ($6,353 for FY2026-27), unless the vehicle is GST-exempt.

Things you need to know: This general information doesn't take your personal circumstances into account. Please consider whether this information is right for you before making a decision and seek professional independent tax and financial advice. Conditions and fees apply, along with credit assessment criteria for lease and loan products. The availability of benefits is subject to your employer’s approval. RemServ may pay and/or receive commissions in connection with its services.