Three outcomes
- Transfer to the new employer. The new employer signs a novation agreement and packaging resumes. There may be a small transfer fee. Your deductions continue as before, adjusted for the new salary.
- Pay it yourself. The lease reverts to an ordinary lease between you and the finance company. You pay the monthly amount (plus GST) from after-tax income and run the car yourself. In the $55,000 EV example, the lease payment of about $899 a month ex GST becomes about $989 a month including GST, from after-tax pay, plus running costs.
- Pay it out or sell. You pay the remaining balance and residual (and fees), or sell the car and use the proceeds. If the car sells for less than the payout, you cover the difference.
What changes in cost
While the lease is packaged, the car costs you about $385 a fortnight in the EV example. Paid from after-tax income with GST, the lease and running costs together would be about $16,100 a year ($989 a month for the lease, about $4,030 of running costs and $180 of fees), or about $620 a fortnight, until you transfer or end it.
Worked figures come from this calculator with: 2026-27 tax rates and Medicare levy, a five-year lease at 8.5% interest, the ATO minimum residual (28.13%), a $500 establishment fee and $15 monthly fee, $3,500 on-road costs, 15,000 km a year, NSW registration of $1,100 and insurance of $1,500, paid fortnightly. Your provider's rate and fees will differ; change them in the calculator.
Before you change jobs
- Ask the new employer whether they offer novated leasing and which providers they use. Many employers can work with any provider.
- Get a payout figure from your provider so you know the worst case.
- Check the lease contract for early termination fees and any pause or redundancy cover.
- If you hold a plug-in hybrid under the transitional exemption, changing the arrangement may end the exemption. Check before signing anything new.
Redundancy
Some providers include cover that pays a few months of lease payments if you are made redundant; it is usually optional and costs extra. Read what it covers before buying it.
Taking it into account up front
If you think you may change jobs within the lease term, choose a shorter term, keep the residual near the minimum, and avoid optional extras that make payouts more expensive.
How a novated lease works
A novated lease is a three-way agreement between you, your employer and a finance company. The finance company leases you a car; your employer agrees to make the payments out of your salary for as long as you work there. Your employer also pays the running costs (fuel or charging, registration, insurance, servicing and tyres) from the same budget. Because these come out of your pay before tax, your taxable income falls, and because your employer is registered for GST, it claims back the GST on the car and its running costs. At the end of the lease you pay a lump sum, the residual, to own the car, or you refinance or sell it.
The catch is fringe benefits tax (FBT). A car your employer pays for is a fringe benefit. For petrol and hybrid cars, providers cancel the FBT by having you pay part of the cost out of your after-tax pay: the employee contribution method (ECM). For eligible electric cars there is no FBT at all, so the whole cost can come out of pre-tax pay. That is why novated leases have become popular for electric cars.
What providers don't show, and how to read a quote
- The interest rate. Many quotes show only a weekly or fortnightly deduction. Ask for the interest rate, the amount financed and the residual in writing; with those, this calculator reproduces the lease payment.
- Fees. Establishment fees, monthly management fees and "budget" fees for running costs add up over five years. Enter them all.
- Running-cost budgets. Quotes often include generous fuel, tyre and servicing budgets that inflate the per-pay deduction. Unspent budgets are usually returned, but check how and when.
- Insurance and extras. Gap insurance, extended warranties and paint protection are often bundled. They are optional.
- The residual. It must be at least the ATO minimum for the term. A higher residual lowers your deductions but leaves more to pay at the end.
- Discounts on the car. Providers negotiate fleet prices, but compare the drive-away price with what a dealer would offer you directly.