Novated lease through your own company
You own the company and the company pays you a salary. That makes you an employee, and an employee can novate. Two rules shape how well it works, and both are worth knowing before you start.
The short answer
Yes, generally, if you are genuinely an employee of your own company and take PAYG salary from it. A novated lease needs an employer to make the payments from your salary, and your company can be that employer in the same way any other employer can.
The complications are not about whether it is allowed. They are about the personal services income rules, which can make the arrangement non-deductible for the company, and about the capacity in which you receive the benefit, which decides whether Division 7A gets involved. Both are set out below.
Who is who when you own the company
A novated lease is a three-way arrangement. Owning the employer does not collapse it into a two-way one. You wear two hats, and the tax rules care a great deal about which hat you are wearing.
| Party | Normally | When you own the company |
|---|---|---|
| The employee | You, on a salary from someone else. | Still you. You have to be a genuine employee of the company, drawing PAYG salary, not only a shareholder taking dividends. |
| The employer | The business you work for. | Your company. It signs the novation deed, takes on the obligation, and carries the FBT reporting. |
| The financier | The lease provider. | Unchanged. The provider assesses your company as the employer, which is where a one-person company can meet resistance. |
Personal services income, and the one-car rule
This is the rule most worth knowing about early, and it is specific enough to check quickly.
If your company's income is personal services income and the PSI rules apply to it, the ATO limits what the company can deduct. On cars the limit is blunt: where a car is used for private purposes, the business can claim expenses for one car only, per individual, and that includes any FBT paid on it. If two cars are in private use at the same time, you choose one, and the choice stands for as long as the business has that car.
What that means in practice
If your company already provides you a car with any private use, a novated lease would be the second car, and the second car is not deductible to the company. The arrangement can still be entered into. It just does not do what you wanted it to do, and you find that out at tax time rather than at signing.
Two exceptions are worth knowing. Where two or more individuals work through the one company, the company can provide one car each. And a car with genuinely no private use is not caught by the one-car limit at all.
Whether the PSI rules apply to you at all is a separate question, turning on the results test, the 80% rule and the other personal services business tests. That is a question for your accountant about your actual contracts, not something a website can answer.
Division 7A, and why capacity matters
Division 7A exists to stop a private company handing value to its shareholders without it being taxed as a dividend. A car is value. So the obvious worry is whether a company providing a car to its owner produces a deemed dividend.
Generally it does not, and the reason is worth understanding rather than taking on trust. Division 7A does not apply to a payment made to a shareholder, or a shareholder's associate, in their capacity as an employee. The fringe benefits tax rules deal with it instead. That is the whole point of the two hats: the same car, provided to the same person, is a fringe benefit if they receive it as an employee, and potentially a deemed dividend if they receive it as a shareholder.
Which makes the employment relationship the thing to get right. A genuine PAYG salary, paid through the company's payroll and reported through Single Touch Payroll, is what puts you in the employee category. A company that pays its owner only in dividends has no salary to sacrifice from and no employee to provide a benefit to.
One carve-out from the carve-out, because it catches people. Loans and debt forgiveness stay inside Division 7A even when provided in an employee capacity. Those benefits are not subject to FBT, precisely so they are not taxed twice. If a lease arrangement involves the company lending you money rather than providing a benefit, it is a different question with a different answer.
The electric car exemption applies the same way
The FBT exemption for eligible electric cars is not restricted by the size or type of employer. A one-person company can access it on the same terms as a listed company: a battery electric or hydrogen fuel cell car, first held and used on or after 1 July 2022, with a luxury car tax value at or under $91,661 for 2026-27, and never subject to luxury car tax.
This is where the arrangement is at its most attractive through your own company, because the FBT that normally makes a packaged car expensive for a small employer disappears. The reporting does not. How the exemption is actually tested covers the eligibility rule in full, including why a driveaway price is the wrong number to compare against the threshold.
What stays the same as any other employer
Owning the employer removes the awkward conversation. It does not remove the obligations that come with being one.
- The FBT reporting. An exempt electric car is still a reportable fringe benefit. Your company still works out the grossed-up value and still reports it on your income statement, and that reported amount still feeds the Medicare levy surcharge, Division 293 and study loan repayments.
- The FBT return. Having an exempt car does not by itself remove a lodgement obligation, and the exemption has to be worked out rather than assumed.
- The commitment. The lease runs for years. If the company stops trading or you wind it up, the obligation comes back to you personally, the same as changing jobs would.
- The provider's assessment. Some providers are cautious about single-director companies, recently incorporated entities, or irregular salary. Expect to evidence the salary.
Work out the tax difference on your salary, and read how it compares to a car loan or buying outright, which is the comparison that matters more when you control both sides of the arrangement.
Where this needs your accountant
More than any other page on this site. Whether the PSI rules apply to your income, whether your salary arrangement puts you in the employee category, how the lease interacts with what the company already provides you, and whether the deduction survives all of it, are questions about your specific structure and your actual contracts.
Novii is an information and referral service. Nothing here is tax advice, and this page is written to help you ask better questions rather than to answer them for your situation.
Questions about leasing through your own company
Can I get a novated lease through my own company
Generally yes, if you are genuinely an employee of the company and take a PAYG salary from it. A novated lease needs an employer to make the payments out of your salary, and your own company can be that employer. Owning the company does not disqualify you. What can stop it working is the personal services income rules, which limit what the company can deduct, and the provider's own assessment of a small or newly incorporated employer.
Does Division 7A apply to a car my company provides me
Usually not, where you receive it as an employee. Division 7A does not apply to a payment made to a shareholder, or a shareholder's associate, in their capacity as an employee, because the fringe benefits tax rules deal with it instead. That makes the employment relationship the thing to get right: a genuine PAYG salary through the payroll is what puts you in the employee category. Loans and debt forgiveness are the exception and stay inside Division 7A even in an employee capacity.
How do the personal services income rules affect a novated lease
Where the PSI rules apply, the business can claim car expenses, including any FBT paid, for one car only per individual if the car has private use. If your company already provides you a car with private use, a novated lease would be the second car and the second car is not deductible. Two exceptions: where two or more individuals work through the one company, it can provide one car each, and a car with genuinely no private use is not caught. Whether the PSI rules apply to you at all depends on the results test and the other personal services business tests, which is a question for your accountant.
Do I need to pay myself a salary to novate through my company
Yes. The arrangement works by deducting the lease payment from salary, so there has to be salary. A company that pays its owner only in dividends has nothing to sacrifice from and no employment relationship to hang the benefit on. The salary should be genuine, run through the payroll and reported through Single Touch Payroll, not a figure written up at year end.
Can my company get the electric car FBT exemption
Yes. The exemption is not restricted by the size or type of employer, so a one-person company accesses it on the same terms as a large one. The car still has to meet the test: battery electric or hydrogen fuel cell, with a luxury car tax value at or under $91,661, and never subject to luxury car tax. The reporting obligation remains either way, so the benefit still appears on your income statement.
Get a quote
A provider assesses your company as the employer and quotes on the car you have in mind. Tell them it is your own company up front, because it changes what they need from you.
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Novii is an information and referral service. When you request a quote your details are provided to an Australian novated leasing provider. Novii is not a lease provider, financier or financial adviser.
Information only, not tax, financial or credit advice.