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Personal Services Income (PSI) Australia: 2026–2027 ATO Compliance Guide

admin9 — Sat, 28 Mar 2026 14:04:46 +0000

The post Personal Services Income (PSI) Australia: 2026–2027 ATO Compliance Guide appeared first on AMA Accountants.

8 Best Strategies to Pay Off Your Home Loan Faster in Australia

admin9 — Mon, 23 Mar 2026 13:48:18 +0000

8 Best Strategies to Pay Off Your Home Loan Faster in Australia

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If you have a home loan in Australia right now, you are carrying one of the largest financial commitments of your life.

According to the Australian Bureau of Statistics, the average new owner-occupier home loan in Australia reached $693,801 in September 2025, with average monthly repayments of approximately $3,935 over a 30-year term at the current average rate of 5.49% per annum.

Over the full life of that loan, you will pay hundreds of thousands of dollars in interest alone.

The good news is that paying off your home loan faster is not just possible — it is entirely achievable with a few smart, consistent strategies. Even small changes to how you manage your repayments can shave years off your mortgage and save you tens of thousands of dollars in interest.

At AMA Accountants, we work with homeowners across Adelaide, Melbourne, Sydney, Perth, Canberra, Darwin, and Tasmania every day — and the clients who build wealth the fastest are the ones who treat their home loan as something to eliminate, not just manage.

Here are the 8 most effective strategies our mortgage brokers and CPA accountants recommend.

1.Make Fortnightly Payments Instead of Monthly

This is one of the simplest and most effective strategies available to any Australian homeowner, yet most people never act on it.

By switching from monthly repayments to fortnightly repayments, you end up making 26 half-payments per year instead of 12 full payments.

The maths works out to 13 full monthly payments per year rather than 12 — meaning you make one extra full repayment every year without feeling it in your budget.

On a $600,000 home loan at 5.49% over 30 years, switching to fortnightly repayments alone can cut approximately 2.5 to 3 years off your mortgage and save you more than $40,000 in interest.

Contact your lender or ask AMA Accountants to help you restructure your repayment schedule today.

2.Make Extra Repayments Whenever Possible

Every dollar you pay above your minimum required repayment goes directly toward reducing your principal — the actual loan balance — rather than interest.

This accelerates the pace at which your loan reduces and lowers the interest calculated on the remaining balance each month.

You do not need to make large extra payments for this to have a meaningful impact.

Even an additional $50 to $100 per fortnight, applied consistently over several years, can reduce a 30-year loan by 3 to 5 years. Tax refunds, work bonuses, and salary increases are all excellent opportunities to direct extra funds into your mortgage.

Most variable rate home loans in Australia allow unlimited extra repayments without penalty — always check your loan contract first.

3.Use an Offset Account

An offset account is a transaction account linked directly to your home loan. The balance sitting in your offset account is subtracted from your outstanding loan balance before interest is calculated each day.

If your home loan balance is $500,000 and you have $50,000 sitting in your offset account, you are only charged interest on $450,000.

This strategy is highly effective because your money is still accessible at all times — it has not been locked into extra repayments — yet it is actively reducing your interest burden every single day.

According to APRA, total balances in Australian offset accounts exceeded $300 billion in the June 2025 quarter, demonstrating how widely Australians use this strategy.

If your current home loan does not include an offset account, refinancing to one could save you significantly.

Speak to an AMA Accountants mortgage broker about whether this option suits your situation.

4.Put Your Salary Into the Offset Account

To maximise the benefit of your offset account, redirect your salary to be deposited directly into it rather than a standard transaction account.

Every day your salary sits in the offset account, it is reducing the interest charged on your home loan.

The effect is most powerful at the beginning of each pay cycle when the full salary amount is sitting in the account.

Even if you spend most of it throughout the fortnight, the daily interest savings accumulate meaningfully over months and years.

This is one of the most passive and powerful strategies available to Australian homeowners — it requires no change in spending behaviour, only a change in where your pay is deposited.

This strategy is particularly well-suited to homeowners in high-cost cities like Sydney, Melbourne, and Perth where loan balances tend to be larger.

5.Round Up Your Repayments

If your minimum required repayment is $1,847 per fortnight, consider rounding it up to $1,900 or $2,000.

The difference is modest in your day-to-day budget but the cumulative impact over a 25 to 30-year mortgage is substantial.

Rounding up by $150 per fortnight on a $600,000 loan at 5.49% could save you over $60,000 in interest and cut more than 4 years off your loan term.

This strategy works well for homeowners across all markets — whether you are in Adelaide, Canberra, Darwin, or Hobart, Tasmania — because it scales with your loan size and requires no complex financial restructuring.

Simply call your lender and adjust your direct debit amount.

6.Refinance to a Lower Interest Rate

With the average owner-occupier variable rate sitting at approximately 5.51% as of early 2026, many Australians are still paying rates that are significantly higher than the most competitive products currently available on the market. According to the Mortgage and Finance Association of Australia, more than 75% of new home loans in Australia are now arranged through a mortgage broker — and with good reason.

Refinancing even 0.5% lower on a $600,000 loan can save you over $3,000 per year in interest.

Over 10 years, that is more than $30,000 — before compounding savings are considered. Around 34,800 Australian homeowners switch their home loan to another lender every month, demonstrating that refinancing is a normal, low-risk financial move when done correctly.

AMA Accountants operates as a licensed mortgage broker serving clients in Adelaide, Melbourne, Sydney, Perth, Canberra, Darwin, and Tasmania. We compare home loan products across multiple lenders and manage the entire refinancing process on your behalf — at no cost to you.

7.Avoid Redrawing Extra Money

Many Australian home loans include a redraw facility — the ability to access any extra repayments you have made above the minimum.

While having this flexibility is reassuring, redrawing frequently destroys the financial progress you have worked hard to build.

Every dollar you redraw is added back to your outstanding balance, re-incurring interest over the remaining loan term.

The psychological discipline of treating extra repayments as permanently gone — not available for discretionary spending — is one of the biggest differentiators between homeowners who pay off their mortgage in 18 years versus 30.

If you need accessible savings for emergencies or irregular expenses, use your offset account for that purpose rather than the redraw facility.

This preserves the cash while continuing to reduce your daily interest charge.

8.Make a Habit of One Lump Sum Payment Per Year

Once per year, direct a meaningful lump sum directly into your home loan principal.

This could be your annual tax refund, an end-of-year work bonus, an inheritance, the proceeds from selling an asset, or simply accumulated savings you do not have an immediate need for.

A lump sum payment of $5,000 applied once per year on a $600,000 home loan at 5.49% could reduce your loan term by more than 5 years and save over $80,000 in total interest.

The earlier in the loan term you make lump sum payments, the greater the impact — because interest in the early years represents a much larger proportion of your repayments.

For many of AMA Accountants’ clients across Adelaide, Melbourne, Sydney, Perth, Canberra, Darwin, and Tasmania, the annual tax refund processed by our CPA team becomes their annual mortgage lump sum — turning a routine tax obligation into a powerful wealth-building tool.

Take Action Today — Every Month Counts

Paying off your home loan faster is not about making dramatic financial sacrifices.

It is about making consistently smarter decisions with the money you already have.

The eight strategies above are not theoretical — they are the practical approaches used by thousands of Australian homeowners every year to reduce their mortgage terms from 30 years to 20, or even fewer.

The most important step is the first one: review your current home loan, understand your repayment structure, and identify which of these strategies you can implement this month.

A qualified mortgage broker and CPA accountant can help you do this in a single conversation.

At AMA Accountants, our team combines certified public accounting expertise with licensed mortgage broking services — meaning we can help you optimise your tax position and your home loan strategy at the same time.

We serve clients across Adelaide, Melbourne, Sydney, Perth, Canberra, Darwin, and Tasmania, both in person and online.

Ready to Pay Off Your Home Loan Faster?

Book a free consultation with an AMA Accountants mortgage broker and CPA today. We will review your current home loan, identify your best refinancing and repayment options, and help you build a personalised plan to become mortgage-free sooner.

Call: 0420 529 890 | Website: www.amaaccountant.com.au

Certified Public Accountants | Licensed Mortgage Broker | Tax Practitioners Board Registered

Authored By Amit Chugh

Partner, CPA & Registered Tax Agent

Your Trusted Accountant for Adelaide, Melbourne, Sydney, Brisbane & Across Australia

Amit Chugh is a Partner at The AMA Accountant and a highly respected CPA & Registered Tax Agent with a proven track record of delivering exceptional accounting and taxation services to individuals, businesses, and corporations across Australia.

With over 25+ of professional experience, Amit has helped thousands of clients streamline their finances, optimise tax returns, and ensure full compliance with Australian Taxation Office (ATO) requirements. His client base spans Melbourne, Brisbane, Sydney, Tasmania, Perth, Adelaide, Darwin, Canberra, and regional hubs including Prospect, Modbury, Mawson Lakes, Woodville, Mount Gambier, Victor Harbor, Whyalla, Port Lincoln, Murray Bridge, Port Augusta, Gawler, and Port Pirie.

Disclaimer

This content is for general informational purposes only and does not constitute financial, tax, legal, or business advice. Outcomes may vary based on individual circumstances, applicable laws, and current regulations, which may change over time.

We recommend seeking personalised advice from a qualified professional before making any decisions. AMA Accountants is a registered provider of accounting and tax services in Australia.

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Smart Tips for First Home Buyers in Australia: What You Need to Know Before You Sign

admin9 — Thu, 19 Mar 2026 09:49:15 +0000

Smart Tips for First Home Buyers in Australia: What You Need to Know Before You Sign

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Buying your first home is one of the most exciting and meaningful financial decisions you will ever make. It is also one of the most complex.

In Australia’s current property market, first home buyers face rising prices, tighter borrowing conditions, and a property landscape that changes significantly from suburb to suburb and city to city — whether you are buying in Adelaide, Melbourne, Sydney, Perth, Canberra, Darwin, or Tasmania.

According to the Australian Bureau of Statistics, the average loan taken out by first home buyers in Australia reached $506,892 in 2024-25, with first home buyer activity representing approximately 28% of all owner-occupier loan commitments nationally.

Despite the challenges, tens of thousands of Australians successfully purchase their first home every year — and the ones who do it well share one thing in common: they approach the purchase logically, not just emotionally.

At AMA Accountants, our team of Certified Public Accountants and licensed mortgage brokers works with first home buyers every day.

We have seen the mistakes that cost people years of financial setback — and the smart decisions that give first home buyers a genuine head start. Here is what you need to know before you sign a single document.

Buying a home is emotional — but it must be logical.

Falling in love with a property is natural. But your mortgage will last 25 to 30 years.

The decisions you make in the first few weeks of your property search will shape your financial life for decades. Read every tip below carefully before you begin attending open inspections.

1.Think Long Term — Buy for the Next 10 to 15 Years, Not Just Today

The most common mistake first home buyers make is purchasing a property that suits their life today without considering what their life will look like in 10 or 15 years.

Will you need more bedrooms as your family grows? Will you still want to be in this suburb when you are 40? Is the property likely to hold — or ideally increase — in value over time?

Property in Australia is a long-term asset. Most financial advisers recommend holding residential property for a minimum of 7 to 10 years to ride out market cycles and justify transaction costs including stamp duty, legal fees, and agent commissions.

In markets like Adelaide, Melbourne, Sydney, and Perth, well-positioned properties have historically delivered strong capital growth over 10-year periods — but only when the fundamentals are right from day one.

Ask yourself before you make any offer: would I still be happy owning this property in 2035? If the answer is uncertain, keep looking.

2.Choose the Right Location — Infrastructure and Amenity Drive Long-Term Value

In Australian property, the old saying holds firmly true: location, location, location. But what makes a location genuinely strong for long-term capital growth is more specific than simply picking a popular suburb.

The most reliable growth corridors share consistent characteristics — and savvy first home buyers in Adelaide, Melbourne, Sydney, Perth, Canberra, Darwin, and Tasmania use these as their buying filters.

When assessing a location, look for the following proximity indicators:

Quality schools — primary and secondary — within a reasonable catchment area
Train stations or reliable public transport corridors within walking distance
Established or planned shopping centres, medical facilities, and cafes
Major employment hubs — either nearby or directly accessible by public transport
Low vacancy rental rates in the area, indicating strong ongoing demand

Government infrastructure investment is also a strong predictor of future capital growth.

When a new train line, freeway, or hospital is announced for a suburb, property values in that area typically begin rising before the project is even completed.

In Adelaide’s north, Melbourne’s outer ring, and Perth’s southern corridor, infrastructure-led growth has been a consistent driver of buyer demand over the last decade.

3.Focus on Fundamentals — Land Value, Growth Potential, and Demand

When you are emotionally attached to a property, it is easy to overlook the fundamentals that determine whether it will perform as an asset. A beautiful renovation or a fresh coat of paint can mask a property with poor land value or limited future demand.

Australia’s most experienced property investors consistently focus on three fundamentals above all else:

Land value: In most Australian capital cities, the land beneath the property holds and grows in value — the structure on top depreciates. A larger land component generally means stronger long-term capital growth. This is particularly relevant for buyers in Adelaide’s inner ring, Sydney’s middle suburbs, and Melbourne’s established corridors.
Growth potential: Look at 10-year median price data for the suburb and compare it to neighbouring suburbs. Consistent above-average growth is a sign of structural demand, not just a short-term surge.
Demand indicators: Days on market, auction clearance rates (in Melbourne and Sydney especially), and rental vacancy rates all give you a real-time picture of how competitive demand is in a given suburb. High demand and low supply is the most reliable predictor of sustained price growth.

As a rule of thumb: buy the best land in the best location you can afford, even if the property on top needs work. A renovatable house in a strong suburb will outperform a brand-new apartment in a weak one every time.

4.Watch for Property Red Flags — Some Issues Cost More Than You Expect

Every property has its quirks, but some features are genuine red flags that can affect your enjoyment of the home, its long-term value, and your ability to resell it in the future. First home buyers — who are often seeing properties through rose-coloured glasses — are most vulnerable to missing these warning signs.

Red flags to watch for when inspecting properties:

Bus stops directly in front of the property: This affects privacy, creates noise and foot traffic, and can deter future buyers — impacting resale value.
Significant easements on the title: Easements grant other parties — often utility companies or councils — rights over part of your land. These restrict what you can build, where you can build it, and can affect the usable area of your property.
Proximity to high-voltage power lines or substations: These affect resale appeal for a large segment of buyers and are difficult to overcome regardless of how good the rest of the property is.
Properties backing onto commercial or industrial land: Zoning can change. What is a quiet paddock today could be a logistics warehouse in five years.
Structural issues flagged in a building inspection report: Never skip a professional building and pest inspection, regardless of how good a property looks. Structural repairs, rising damp, and termite damage are common in older Australian homes and can cost tens of thousands of dollars to remediate.

A good buyer’s advocate or mortgage broker can help you identify red flags before you make an offer — particularly in competitive markets like Sydney, Melbourne, and Perth.

5.Plan for All Costs — The Deposit Is Just the Beginning

The deposit is the largest single cost associated with buying your first home — but it is far from the only one. One of the most common reasons first home buyers experience financial stress in their first year of homeownership is being underprepared for the full cost of purchasing.

Beyond your deposit, budget carefully for the following:

Stamp duty: One of the largest upfront costs. Rates vary significantly by state — South Australia, Victoria, New South Wales, Western Australia, the ACT, the NT, and Tasmania all have different stamp duty scales and first home buyer concessions or exemptions. In NSW, the First Home Buyer Assistance Scheme provides full exemptions for homes under $800,000. In Victoria, exemptions apply for homes under $600,000. Check your state’s current thresholds before budgeting.
Legal and conveyancing fees: Typically $1,500 to $3,000 for a residential property purchase in Australia.
Building and pest inspection: $400 to $800 depending on property size and location. Non-negotiable for any established home.
Loan establishment fees: Some lenders charge application or settlement fees of $300 to $600. These are sometimes waived — ask your mortgage broker to negotiate.
Lenders Mortgage Insurance (LMI): If your deposit is less than 20% of the purchase price, most lenders will charge LMI — which can run into thousands of dollars. The federal government’s Home Guarantee Scheme allows eligible first home buyers to purchase with as little as 5% deposit without paying LMI.
Council rates, water rates, and utilities: Ongoing costs that vary by suburb and property size. Budget $2,500 to $5,000 per year depending on your location.
Home and contents insurance: Required by most lenders from settlement day. Budget $1,200 to $2,500 per year depending on your location and rebuild value.

A thorough budget prepared before you begin your search — not after you fall in love with a property — is one of the most valuable things a first home buyer can have. AMA Accountants provides pre-purchase financial planning consultations for first home buyers across Adelaide, Melbourne, Sydney, Perth, Canberra, Darwin, and Tasmania.

Government Grants and Schemes for First Home Buyers in 2025

Australia has several active federal and state government initiatives designed to help first home buyers enter the market. Understanding what you are entitled to before you start searching can significantly improve your budget and purchasing power.

Key First Home Buyer Schemes Available in Australia (2025):

First Home Guarantee (FHBG): Allows eligible first home buyers to purchase with a 5% deposit without paying Lenders Mortgage Insurance. Available nationally through participating lenders.
First Home Owner Grant (FHOG): A one-off cash grant available in most states for eligible first home buyers purchasing or building a new home. Amounts vary by state: $10,000 in NSW, $10,000 in VIC, $15,000 in SA (Adelaide), $10,000 in WA (Perth), $10,000 in QLD, and varying amounts in the NT (Darwin) and Tasmania.
Stamp Duty Concessions and Exemptions: Most Australian states and territories offer full or partial stamp duty relief for first home buyers under a specified property price threshold. These thresholds and concession amounts are updated periodically — confirm the current rates with your conveyancer or AMA Accountants.
First Home Super Saver Scheme (FHSSS): Allows eligible Australians to make voluntary contributions into their superannuation fund and withdraw up to $50,000 (from 1 July 2022) to use toward a first home deposit. This can provide significant tax savings compared to saving in a standard bank account.

Help to Buy Scheme: The federal government’s shared equity scheme allows eligible buyers to co-purchase with the government contributing up to 40% of the purchase price for new homes and 30% for existing homes, reducing your required deposit and ongoing repayments.

Eligibility conditions, income caps, and property price limits apply to all of the above schemes and vary by state. AMA Accountants can assess your eligibility for all applicable federal and state grants before you begin your property search.

The Bottom Line: Prepare First, Search Second

Buying your first home in Australia is a milestone that deserves to be done well. The difference between a first home buyer who builds genuine wealth and one who spends years recovering from a poor decision almost always comes down to preparation — understanding the full cost, choosing the right location, recognising red flags, and thinking about the next 10 to 15 years, not just the next open inspection.

The five tips in this article are not abstract principles — they are the practical framework our CPA accountants and mortgage brokers use when guiding first home buyers through the process in Adelaide, Melbourne, Sydney, Perth, Canberra, Darwin, and Tasmania every single week. Use them as your checklist before you make your first offer.

Ready to Buy Your First Home? Talk to AMA Accountants First.

Our team of Certified Public Accountants and licensed mortgage brokers provides end-to-end first home buyer support — from assessing your grant eligibility and structuring your deposit, to comparing home loan products and planning for all upfront costs. We work with first home buyers across Australia, both online and in person.

Call: 0420 529 890 | Website: www.amaaccountant.com.au

Certified Public Accountants | Licensed Mortgage Broker | Tax Practitioners Board Registered

Authored By Amit Chugh

Partner, CPA & Registered Tax Agent

Your Trusted Accountant for Adelaide, Melbourne, Sydney, Brisbane & Across Australia

Disclaimer

We recommend seeking personalised advice from a qualified professional before making any decisions. AMA Accountants is a registered provider of accounting and tax services in Australia.

The post Smart Tips for First Home Buyers in Australia: What You Need to Know Before You Sign appeared first on AMA Accountants.

Novated Lease in Australia – Benefits, Drawbacks & Tax Savings Explained (2026 Guide)

admin9 — Wed, 18 Mar 2026 04:28:47 +0000

Novated Lease in Australia – Benefits, Drawbacks & Tax Savings Explained (2026 Guide)

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With the cost of living continuing to pressure household budgets across Australia, more employees are asking their HR departments and accountants the same question:

Is a novated lease worth considering?

The short answer is that it depends on your income, your vehicle choice, and how long you plan to stay with your employer. The detailed answer requires understanding how novated leases work, who benefits the most, and where the real risks are.

In 2026, the novated lease landscape in Australia has changed a lot due to the federal government’s decision to extend the Fringe Benefits Tax exemption for eligible electric vehicles. This makes EVs under a novated lease one of the most tax-efficient ways to drive a new car in Australia.

For Australians comparing car finance options in 2026, weighing novated lease arrangements against car loans and cash purchases, the ability to reduce tax through a car lease has become a key factor.

This is especially true for employees in the 32.5% and 37% marginal tax brackets. At the same time, higher interest rates and stricter borrowing conditions have affected the financial choices for many Australians.

At AMA Accountants, our Certified Public Accountants and registered tax agents assist clients in Adelaide, Melbourne, Sydney, Perth, Canberra, Darwin, and Tasmania with understanding the total costs of a novated lease.

We help them figure out how much they will save before they sign any documents. This guide provides all the information you need to make a smart choice.

What Is a Novated Lease?

A novated lease is a three-way car financing arrangement between you (the employee), your employer, and the finance company. Under this structure, your employer takes on the obligation of making lease repayments on your behalf deducting the lease costs from your salary before income tax is applied.

This process is commonly known as salary packaging a car in Australia, or salary sacrifice. It is one of the most widely used forms of car finance in Australia for employees seeking to reduce their tax liability through a structured arrangement approved by the ATO.

Because the lease payments come out of your pre-tax income, your taxable income is reduced that means you pay less income tax each pay cycle. The vehicle remains the property of the finance company during the lease term (typically two to five years), and at the end of the term you can pay a lump sum residual value to own the car outright, refinance the residual, or hand the car back and start a new lease.

Novated leases are available to employees of most Australian companies that offer salary packaging benefits. Government employees in South Australia, Victoria, New South Wales, Western Australia, the ACT, Queensland, the Northern Territory, and Tasmania have historically had access to some of the broadest salary packaging arrangements in the country, given favourable FBT treatment for public sector employees.

How It Works — A Simple Example:

Employee income: $100,000 per year | Novated lease cost: $12,000 per year (pre-tax)

Taxable income after salary sacrifice: $88,000

Estimated annual income tax saving: approximately $3,900 per year (based on 32.5% marginal rate)

Note: Actual savings depend on your marginal tax rate, FBT applicability, vehicle type, and employer’s salary packaging arrangement. Speak to a registered tax agent before proceeding.

Key Benefits of a Novated Lease in Australia (2026)

Tax Savings Through Pre-Tax Salary Deductions

The most significant financial benefit of a novated lease is the reduction in your taxable income. Because lease repayments are deducted from your gross salary before PAYG withholding is calculated, you effectively pay for your car with pre-tax dollars. The higher your marginal tax rate, the greater the benefit.

For a taxpayer earning $120,000 in Sydney, Melbourne, or Perth — sitting in the 37% marginal tax bracket — salary packaging a $15,000 annual lease cost reduces their tax liability by approximately $5,550 per year. Over a four-year lease, that is a potential saving of more than $22,000 in income tax alone, before any additional benefits are considered.

FBT Exemption for Electric Vehicles — A Game Changer

Since 1 April 2022, the Australian federal government has exempted eligible electric vehicles from Fringe Benefits Tax under a novated lease arrangement — provided the vehicle’s value is below the luxury car tax threshold ($91,387 for 2025-26). This is one of the most significant tax concessions available to Australian employees in recent years.

Fringe Benefits Tax would ordinarily apply to employer-provided vehicles and represents a substantial cost under a standard novated lease arrangement. For most petrol or diesel vehicles, FBT is calculated at 20% of the car’s base value per year — reducing the net tax benefit of the lease considerably. For eligible EVs, this cost is completely eliminated.

The EV novated lease tax benefits available in 2026 are substantial, and the vehicle range has expanded considerably. FBT-exempt models popular under a novated lease in Australia include the Tesla Model 3, BYD Atto 3, BYD Atto 2, Hyundai Ioniq 6, Kia EV6, and MG ZS EV. The BYD Atto 2, with its competitive entry price well below the luxury car tax threshold, has become one of the most cost-effective EV novated lease options for employees in Adelaide, Melbourne, and Perth who want to reduce tax in Australia through a car lease while keeping their total lease commitment manageable.

Plug-in hybrid electric vehicles (PHEVs) were also eligible until 31 March 2025, when the exemption was removed for new PHEV agreements. If you are considering any eligible EV in Adelaide, Melbourne, Sydney, Perth, Canberra, Darwin, or Hobart, Tasmania, a novated lease structured as salary packaging a car in Australia is almost certainly the most tax-efficient way to finance it.

GST Savings and All-In-One Running Costs

When a novated lease provider acquires a vehicle on your behalf, they purchase it as a business transaction — meaning they can claim back the GST on the purchase price. This GST saving is typically passed through to you, effectively reducing the vehicle’s cost by approximately 9% before the lease even begins.

Most novated lease packages also bundle all running costs — fuel or charging, comprehensive insurance, registration, tyres, and scheduled servicing — into a single fortnightly deduction. This simplifies your personal cash flow and ensures all running costs benefit from the pre-tax treatment where allowable under ATO rules. It also removes the inconvenience of managing multiple car-related expenses separately.

Drawbacks of a Novated Lease — What You Need to Know

A novated lease is not the right solution for everyone. Before committing to a three to five-year arrangement, every Australian employee should understand the following risks and limitations clearly.

Key Drawbacks — Understand These Before You Sign:

• Limited savings at lower income levels: If your taxable income is below $45,000 per year, your marginal tax rate of 19% means the pre-tax savings are modest. The tax benefit narrows considerably the lower your income. For lower-income earners in Adelaide, Darwin, or Tasmania, a standard car loan may be more cost-effective.
• You do not own the car: The vehicle belongs to the finance company throughout the lease. You only gain ownership if you pay the residual value at the end of the term — which can be a substantial lump sum, often 28% to 46% of the original purchase price depending on the lease term.
• Job change or early termination: If you change employers mid-lease, you must either take over the lease repayments from your own post-tax income or pay an early termination fee, which can be thousands of dollars. This is one of the most frequently overlooked risks of novated leases, particularly in industries with high staff turnover across Sydney, Melbourne, and Perth.
• Higher total cost versus a loan or cash purchase: When you factor in lease interest rates, establishment fees, and the running cost margin built into novated lease packages, the total amount paid over the life of the arrangement often exceeds what you would pay through a standard car loan or cash purchase — particularly for petrol vehicles where no FBT exemption applies.
• Reduced borrowing capacity: Because a novated lease deduction reduces your take-home pay, mortgage lenders view it as a financial commitment and reduce your assessed borrowing capacity accordingly. If you are planning to apply for a home loan in Adelaide, Melbourne, Sydney, or Perth within the lease term, speak to AMA Accountants before entering a novated lease arrangement.
• Running cost estimates may exceed actual usage: Novated lease providers estimate fuel, servicing, and tyre costs in advance. If you drive less than the agreed kilometres, you will have overpaid into the running cost component. Any credit is typically returned at year-end but represents an interest-free loan to the provider in the interim.
• Policy risk on FBT exemptions: The EV FBT exemption is a government policy that can be changed, limited, or removed at any future federal budget. If you are entering a five-year lease on the basis of the current FBT exemption, you should understand that future policy changes could affect the economics of your arrangement mid-lease.

Novated Lease vs Car Loan vs Cash Purchase — Full Comparison

Understanding where a novated lease sits relative to the alternatives is critical before making a decision. When completing a car finance comparison in Australia — particularly between a novated lease, a standard car loan, and a cash purchase — the differences in tax treatment, total cost, and ownership structure are significant. The table below summarises the key differences across all three options to help you decide which form of car finance in Australia suits your situation best.

The table makes it clear that a novated lease delivers its strongest advantage for higher-income earners driving eligible EVs, where the combination of pre-tax savings and FBT exemption is at its most powerful. For petrol vehicles and lower-income earners, a car loan or cash purchase will often represent a lower total cost despite the absence of tax benefits.

Is a Novated Lease Worth It in 2026?

A novated lease is most likely to be worth it if all of the following conditions apply to your situation:

Your taxable income is $80,000 or above: placing you in the 32.5% or 37% marginal tax bracket where pre-tax savings are material
You are selecting an eligible electric vehicle: to take full advantage of the current FBT exemption before any future policy changes
You are stable in your current employment: with no near-term plans to change jobs within the lease term
You do not plan to apply for a mortgage soon: or have already secured your home loan before entering the arrangement
You are comfortable not owning the vehicle: and understand the residual payment required at the end of the lease

A novated lease is less likely to be worth it if your income is below $60,000, you drive very few kilometres per year, you are likely to change jobs, or you are planning a significant loan application in the near future. In these scenarios, the simplicity and lower total cost of a car loan or cash purchase may be more appropriate.

AMA Accountants Recommendation:

Never enter a novated lease arrangement without first having a registered tax agent and CPA calculate your actual after-tax saving based on your personal income, vehicle choice, and employment situation.

Generic online calculators use assumptions that may not reflect your real marginal rate, FBT position, or employer’s salary packaging rules. The difference between a well-structured novated lease and a poorly considered one can be thousands of dollars.

Talk to a CPA Before You Commit

A novated lease can be an excellent financial tool for the right person in the right situation — particularly in 2026, where the EV FBT exemption makes electric vehicles under a novated lease one of the most genuinely tax-efficient benefits available to Australian employees. But it is not a one-size-fits-all solution, and the risks of entering a poorly structured arrangement are real.

At AMA Accountants, our Certified Public Accountants and registered tax agents provide personalised novated lease assessments for employees across Adelaide, Melbourne, Sydney, Perth, Canberra, Darwin, and Tasmania. We will calculate your actual tax saving, assess the impact on your borrowing capacity, and help you understand whether a novated lease or an alternative financing option represents the better outcome for your individual circumstances.

Get a Personalised Novated Lease Assessment from AMA Accountants

Before you sign a novated lease agreement, let our CPA team run the numbers for your exact income, vehicle, and employment situation. We provide clear, jargon-free advice with no obligation — so you can make a fully informed decision.

Call: 0420 529 890 | Website: www.amaaccountant.com.au

Certified Public Accountants | Registered Tax Agents | Tax Practitioners Board Registered

Authored By Amit Chugh

Partner, CPA & Registered Tax Agent

Your Trusted Accountant for Adelaide, Melbourne, Sydney, Brisbane & Across Australia

Disclaimer

We recommend seeking personalised advice from a qualified professional before making any decisions. AMA Accountants is a registered provider of accounting and tax services in Australia.

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