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Is GST payable on a car purchased under a novated lease?  No.  The customer (driver) does not pay GST.

How GST is calculated

When consumers buy goods or services from businesses, GST is collected by the business on behalf of the Australian Tax Office. (ATO) This is the law. 

GST currently is set at 10%.  A car valued at $30,000 – the GST component is $2,727.27. The ATO still requires this amount to be paid.

Who pays the GST on a Novated Lease car?

Because the dealership makes the sale, they collect the GST on the car.  How is this handled?

  • The financier of the lease pays the dealership the full amount once the loan has settled including GST.
  • The financier then claims back the GST from the Australian Tax Office via input tax credits.
  • The customer does not finance the GST at all!

What about ongoing costs?

The great part of a novated lease is that the ongoing costs of running the car including the lease payment, fuel, servicing, tyres, registration, insurance etc also get a GST saving.

The novated lease is a benefit offered by your employer and essentially you are using a personal car and running it like a company car for tax purposes.  That means, you do not pay GST on the running costs either as now your employer claims the input tax credit from the ATO. 

Contrary to popular belief, it is not 100% of the GST applicable to all your costs – as a novated lease is setup in a way that drivers avoid paying another tax. Fringe benefit Tax.

So, a portion of the running costs is paid in after tax dollars, but the pre-tax component is GST free.  It is still a significant saving, and another reason why Novated Leasing is a great way to buy a car.

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This example is for illustrative purposes only. You should seek financial advice to see if salary packaging or a Novated Lease suits your personal circumstances