Skip to content

Don’t double count the hospital / NFP FBT cap when judging a novated lease

A very common claim in hospital and NFP circles goes something like:

“If you get FBT exemption from your workplace, novated lease is worth it. Most health places or NFPs offer it.”

Sometimes that’s true.

But it’s also very easy to double count the hospital / NFP salary packaging cap and mistakenly attribute an existing benefit as “extra saving from the car”, when in reality you have simply redirected the same capped benefit away from living expenses and towards the novated lease.

This page explains the logic, and how to think about it properly.

The cap is real — and it’s limited

The usual FBT exemption for eligible employers is capped:

  • $9,010 for public hospitals (and some rebatable employers), and
  • $15,900 for a public benevolent institution (PBI) or health promotion charity.

Most of the time, employees can already salary-package:

  • everyday living expenses, and/or
  • rent / mortgage-related payments (via approved mechanisms), and/or
  • credit card repayments that are linked to living expenses,

up to that cap.

The cap is finite.

The key question: would you have used the cap anyway?

The first question I always ask is:

Without this novated lease, would you otherwise have been able to use the $9,010 / $15,900 cap on living expenses (up to the cap)?

If the answer is yes, then packaging a petrol-car novated lease under that cap is usually not an additional perk.

You have simply used the same pot of FBT-exempt benefit for the car instead of living expenses.

This is why it is inaccurate to treat the $9,010 / $15,900 cap itself as “net saving from the novated lease” if you were already able to use it anyway.

Most people can use it up just with rent / mortgage / credit card repayments.

A common scenario: “I paused my home-loan packaging to package the car”

People often describe doing something like:

I’ve ceased/paused my home-loan based FBT exemption packaging to package the car instead.”

This is a very understandable approach — but it highlights the point.

If you were previously using the cap on home-loan / living expenses, and you stop doing that to package the car instead, then the cap itself is not an extra benefit created by the novated lease.

It’s the same capped benefit, just redirected.

How to evaluate a petrol-car novated lease in this setting (without double counting)

If you are already maxing out the $9,010 / $15,900 cap using living expenses, then to assess whether a petrol-car novated lease is worth it, you should mentally frame the comparison as:

Evaluate the car lease as if you didn’t have additional cap available, because you don’t.

In other words:

  • The cap is already “spent” in the counterfactual baseline (living expenses).
  • Packaging the car under the cap is mainly a swap of what you salary package, not a new source of savings.

If you were already able to spend the cap on living expenses etc, then make sure that your novated lease provider generates a quote without assuming the use of this FBT-exemption cap.

I have once seen an ICE novated lease quote which has applied the $9,010 FBT-exemption cap automatically in their quote, producing a claim of saving that is invalid once the cap has already been used elsewhere.

Always double check what assumption is being made in your quote.

EVs are a separate topic

It’s worth separating two different concepts:

  • The hospital / NFP cap (which is limited and easy to fill with living expenses), versus
  • The EV FBT exemption, which can apply even for non-exempt employers (as long as the EV is eligible).

So:

  • If you are talking about petrol cars under the hospital/NFP cap, double counting is the big trap.
  • If you are talking about eligible EVs, you are not at risk of double counting.

The takeaway

If you remember nothing else:

If you were already able to use the $9,010 / $15,900 cap for living expenses, then using it for an ICE novated lease is usually not “extra saving” — it’s mainly a reallocation of the same capped benefit.

Make sure that any quote generated uses the correct assumption if you are a hospital / NFP employee, have already used the $9,010, and are looking at an ICE NL.

Optional Support

Both this guide and the spreadsheet are free. If they prove helpful, consider: