A novated lease is a three-way agreement where an employer, employee, and finance company arrange for the employee’s pre-tax salary to cover the running costs of a vehicle. This arrangement is often available to public sector workers. For example, an employee could lease a car, and the lease payments, along with associated expenses like fuel, registration, and insurance, would be deducted from their gross salary before tax is calculated.
This type of salary packaging arrangement can offer potential financial advantages, such as reduced taxable income and potentially lower overall vehicle costs. The availability of such schemes for public servants often stems from government initiatives designed to attract and retain qualified personnel. The historical context for these arrangements lies in the broader development of employee benefit programs, which aim to enhance overall compensation packages.
