How do I salary sacrifice my car?

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, and in Australia this is known as a novated lease. 

Car salary sacrifice: How it 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. You pay for the car and running costs in pre-tax dollars before income tax is applied to your salary, which lowers your taxable income and therefore the amount of tax you have to pay. Regardless of your income tax rate, salary sacrificing your car can save you a lot. 

A novated lease offers additional benefits too. With a novated lease, you won’t pay GST on your car or running costs, and you can access wholesale pricing to get a new car cheaper. That said, you can salary sacrifice a used car too, or you can bring your existing car. 

Car salary sacrifice: How do I get started?

To salary sacrifice your car and qualify for a novated lease, you do need to be employed, as your lease is paid with your salary (as the name suggests). 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 – we have a handy employer guide and you can suggest us to your employer.

The process can be summarised like this:

1. Once you’ve done your research on novated leasing and picked a provider you like, you can get a quote over the phone – it should only take a few minutes.

2. You receive your quote via email and while you’re mulling it over, your provider can get you pre-approved for finance. There’s still no obligation at this point but it can speed things up.

3. 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.

4. 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, rego, roadside assistance, insurance and servicing) into your lease, these will all be covered too. To understand the process in more detail, see our ‘how it works‘ and ‘Steps to getting a novated lease car’ articles.