How do I salary sacrifice my car?

Whatever your income tax rate, salary sacrificing your car can save you a lot of money. You may have heard about salary sacrificing to pay less income tax.

One of the most cost-effective things you can salary sacrifice is your car, which in Australia is known as a novated lease.

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How salary sacrificing your car works

Salary sacrificing your car can potentially lower your tax bill by several thousand dollars (and sometimes more) because it utilises your pre-tax income to pay for your car and its running costs.

But a novated lease offers additional benefits. With a novated lease, you can save up to $6,334 in GST on the cost of your car, save 10% on the car’s running costs, and you can access wholesale pricing to get a new car for cheaper.

That said, you can put a used car or even your existing car on a novated lease too.

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How do I get started with salary sacrificing my car?

As we mentioned in the previous chapter, you need to be employed and paid via PAYG, and your employer also needs to offer novated leasing.

If your employer doesn’t offer novated leasing, we’re happy to talk to them about it and guide them through the process of getting set up.

The process can be summarised like this:

Once you’ve done your research on novated leasing and picked a provider you like (we’re not biased or anything, but we highly recommend us), you can get a quote over the phone – it should only take a few minutes.
You receive your quote via email and while you’re mulling it over, your provider (again, we strongly suggest using us) can get you pre-approved for finance. There’s still no obligation at this point, but it can speed things up.
If you decide to go ahead, you and your employer sign a simple agreement that says that your employer will make payments from your salary on your behalf.
You get final approval on finance and get your car and welcome kit.

Then you don’t have to do much – your employer continues to make payments for you from your pre-tax salary and if you’ve chosen to roll your running costs (fuel / electricity, rego, roadside assistance, insurance, servicing and tyres) into your lease, these will all be covered too.

To understand the process in more detail, see the next few chapters.