How to buy or sell a used car privately and still save GST through a novated lease

— with one extra step.

When it comes to used cars, almost everyone believes the GST saving only applies to a car bought from a dealer. The corollary: a private sale means no GST, and therefore a much smaller saving inside a novated lease.

That’s not quite true. With one extra step, the saving is still on the table.

The secret, both ways

If you’re buying a used car privately and financing it through a novated lease, there’s a way to get the cheaper private-sale price and the GST saving — the two things everyone assumes you have to choose between.
If you’re selling, the same mechanism widens your buyer pool to include novated-lease buyers (who would otherwise be priced out by losing the GST saving on a private buy) at only a small cost.

The trade-off everyone assumes (and why it’s wrong)

The conventional wisdom goes like this:

Buy a used car from a dealer → e.g. if you buy a $66,000 car, the price tag consists of $60,000 + $6,000 GST, and there is $6,000 effective GST saving in the context of novated lease financing¹.
Buy a used car privately → e.g. if you buy a $66,000 car, the price tag has no GST component, so the novated lease financing is done on the entire $66,000.

So you choose: cheap price or GST saving. Not both.

The secret is that you don’t actually have to choose.

By putting a car dealer in the middle of the transaction for a small fee, a private used-car sale can be turned into a normal taxable supply — which means the buyer’s financier can claim the GST after all, on a car bought at the private-sale price.

How it actually works: the dealer middleman

Take a used car worth $66,000.

Sold privately, it’s just $66,000 with no GST.
Sold through a dealer middleman (engaged for a small fee), it becomes $60,000 + $6,000 GST — the same $66,000, now split into a GST-exclusive price and the GST.

The obvious question is where that $6,000 of claimable GST came from, given the original sale had none.

When the dealer sells the car to the finance company (which finances the car under-the-hood for a novated lease), that’s an ordinary taxable supply — $60,000 plus $6,000 GST — so the dealer owes the ATO that $6,000 in output tax.

The clever part is on the buying side. Because the private seller is unregistered for GST, at first glance there’s no GST in that sale and nothing for the dealer to claim.

However Division 66 of the GST Act has a provision for that. It lets a GST-registered business that buys second-hand goods from an unregistered seller, for resale in the ordinary course of business, claim a notional input tax credit equal to 1/11 of the price it paid, even though no GST was ever charged on that purchase.

So on the $66,000 the dealer paid the private seller, it claims a notional credit of:

$66,000 ÷ 11 = $6,000

That cancels exactly against the $6,000 of output tax the dealer owes on the on-sale to the financier. On the car itself, the dealer’s GST in and out net to zero.

Their profit comes from a separate service fee of, say, $500 — charged for handling the transaction and paperwork. The fee is itself GST-applicable, so it breaks down as $454.55 + $45.45 GST. The dealer remits the $45.45 to the ATO and keeps $454.55 net.

Setting it up in practice

Find a dealer willing to act as middleman, and agree the fee in writing. Some novated lease providers can point you to one. Reputable used-car dealers are often happy to do this for a flat fee — it is pure margin for some routine paperwork.
Agree who wears the fee (buyer or seller) as part of the price negotiation.
Make sure a proper tax invoice is issued by the dealer to the financier — that is what the financier needs to claim the credit.
Make sure the dealer keeps the Division 66 records of the purchase from the private seller (name, address, date, description, price). Without these, the credit is not claimable.

Why the finance company can’t just do this itself

If a dealer can claim a notional credit on a private purchase, why can’t your novated lease provider or the underlying financier buy the car directly and do the same?

Because Division 66 only applies to goods acquired for sale or exchange in the ordinary course of business.

A financier buying your car is acquiring it to lease it, not to sell it, so it can’t use Division 66, and with no tax invoice it has nothing to claim. A car dealer, whose ordinary business is buying and selling cars, can.

That’s the entire reason the dealer is interposed: they convert a GST-less private sale into a normal taxable supply, complete with the tax invoice the financier needs.

It’s also why you can’t skip the dealer and just “do it yourself”.

The numbers

The dealer’s cash flow splits cleanly into two separate streams: the car transaction (which nets to zero) and the service fee (which is the dealer’s only profit):

Cash flow	Amount
Car transaction
Received from finance company for the car	+$66,000.00
Paid to you (private seller)	−$66,000.00
GST owed on the on-sale (output tax)	−$6,000.00
Notional GST credit on the purchase (Division 66)	+$6,000.00
Subtotal — car flow	$0.00
Service fee (separate)
Service fee charged (GST-inclusive)	+$500.00
GST owed on the fee (1/11)	−$45.45
Subtotal — fee flow	+$454.55
Net kept by the dealer	+$454.55

From the buyer’s side, the win is just as clean: the lease is now written on $60,000 instead of $66,000, because the financier recovers the $6,000¹. You’ve kept the private-sale price and picked up the GST saving on top — minus only the small dealer service fee.

From the seller’s side, the win is structural rather than monetary: the same trick brings novated-lease buyers back into your market — to them, your car is now ~9% cheaper in effective terms — while you still net essentially your private-sale price.

Modelling this in the calculator

To model this scenario in the novated lease calculator, choose “Used car – dealer sale” under “Vehicle condition” — that switches the lease base to the GST-exclusive figure to reflect the recovered credit.

Is this even legal?

It feels too good to be true, so it’s worth being clear: this is the intended operation of the GST law, not a loophole.

That said, the “secret” only holds up if it’s done properly.

The dealer must genuinely take title — actually buy the car and sell it on, with the records Division 66 requires (the private seller’s name and address, the date, a description of the car, and the price). A fee to “paper” a transaction the dealer is not really part of does not qualify.

The dealer must also issue a proper tax invoice to the financier on the on-sale. That tax invoice is what the financier relies on to claim the GST credit.

Caveat on pricier cars

The car limit (GST credit cap). The GST credit a buyer can claim on a car is capped at 1/11 of the car limit — $69,674 for FY2025–26. The $66,000 example sits below this cap, so the financier recovers the full $6,000. For cars above the car limit, the recoverable GST plateaus at $6,334 regardless of how much more the car costs — the saving stops scaling once the cap binds.

What it’s worth

Net it off:

A dealer service fee of around $500–$1,500 (anecdotally).
Against a GST saving of 1/11 of the agreed price on a car below the car limit (e.g. $6,000 on a $66,000 car)¹, capped at ~$6,334 for cars above the car limit.
And on an eligible EV, that saving stacks on top of the FBT exemption — a separate, much larger saving on the same car.

Key takeaway

If you remember nothing else:

A private used-car sale doesn’t have to mean no GST saving. A dealer middleman, a small fee, and Division 66 between them convert a private sale into a normal taxable supply — and the GST saving reappears.

For buyers, that means private-sale pricing and the GST saving on the same car. For sellers, it means a wider buyer pool without changing what you net.

Not advice

This page is general information about how Division 66 of the GST Act and the car limit interact with novated-lease purchases of second-hand cars. It is not financial, tax, or legal advice and does not take your circumstances into account. Tax law, thresholds, and ATO administrative practice can change. Before relying on this in a transaction, confirm the current rules and your specific eligibility with your lease provider and a registered tax agent.

See the full disclaimer.

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I’m backing Dr Michael Keane’s fight for salary packaging transparency

Workplaces with an exclusive salary packaging provider tend to have noticeably higher effective interest rates on novated leases — yet the commercial terms behind these exclusive arrangements are rarely disclosed to employees.

Dr Michael Keane, a Melbourne anaesthetist, is taking a Victorian health service to the Victorian Supreme Court to obtain the unredacted contract between the hospital and its exclusive salary packaging provider. The unredacted version may shed light on alleged sign-on fees associated with exclusive access to hospital employees — an arrangement whose financial terms employees are rarely privy to.

To date, Dr Keane has personally spent around $15,700 pursuing this case, with further legal costs anticipated. I believe this matters to anyone in a workplace with an exclusive provider. If you agree, consider supporting his GoFundMe.

Novated lease companies often claim that this full amount of GST is saved; however on closer scrutiny this is not entirely true if one chooses to pay the residual value to own the vehicle outright at the end of the lease. The residual value payable includes GST, and therefore part of the initially “exempted” GST is still payable at this stage. ↩ ↩² ↩³