FAQ: What effect does Fringe Benefits Tax (FBT) have on a Novated Lease?

What effect does Fringe Benefits Tax (FBT) have on a Novated Lease?

Salary packaging a vehicle is a non-cash employment benefit subject to Fringe Benefits Tax (FBT). The FBT amount is paid to the Australian Tax Office (ATO) by your employer, and is generally charged back to you as an additional pre-tax payment. Therefore, Novated Leasing is most advantageous for an employee when the amount of FBT is less than the income tax that would've been payable without salary sacrifice.

Fringe Benefits Tax (FBT) is calculated annually, based on the FBT year of 1 April to 31 March. The two most common methods for calculating the FBT liability on a salary packaged car are the Statutory Formula Method and the Employee Contribution Method.