Budget update | Currently driving 25,000 - 39,999 kms pa? - Case Study

The 2011-2012 Federal Budget alterations to novated leases only affects new novated leases entered into after 7:30pm on 10th May 2011.

If you previously drove between 25,000kms and 39,999kms pa, you would have been taxed at 11% and your next novated lease will eventually be taxed at 20%*. The increase is being phased in over a four year period, and with your next lease you'll experience a reduction in the size of your tax benefit.

Salary packaging a car does however remain the most tax effective way of owning a car.

Here's a worked example of the changes you could expect to see.

Salary and vehicle details


2011 Honda Jazz

Base value of car



$60,000 + super


3 year lease

Annual kilometres  

30,000kms p/a

Given the car and salary details above, the table below displays the difference before and after the budget changes.

Annual payroll effect 
No salary packaging

Leases entered into before 7:30pm 10th May 2011

Leases entered into after
7:30pm 10th May 2011*

Statutory %




Gross salary




Salary sacrifice








Taxable income




Income tax




Employee contribution




Take home pay




Cost of car




Disposable income




*The change to the statutory rate is being phased in over 4 years and will change from 14% effective 10 May 2011, to 17% effective 1 April 2012, to 20% effective 1 April 2013 and beyond.

The above example illustrates a worst case scenario as it utilises the tax effect of the full 20% statutory rate and does not take into consideration the gradual increase in rate which would actually reduce costs and increase disposable income.

As you can see, after the full 20% change comes into affect in April 2013, the savings for this particular driver segment will reduce by $705.

A novated lease is still however, the most tax efficient way to own a car, and the savings when compared to not salary packaging in this particular instance is $3,829.




Honda Jazz



All of the above costs are estimates, and include GST.

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