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Super guarantee and payroll risks

One of the least discussed — and most poorly understood — risks of novated leasing is how your employer calculates super guarantee (SG).

Most people assume that:

“Surely my employer still has to pay super on my original salary, right?”

Often yes. But not always. And importantly: they don’t have to.

This page explains why, with direct reference to the ATO’s own guidance.

The common belief: “They can’t reduce SG anymore”

A commonly cited argument goes like this:

“Since 1 January 2020, employers must calculate super on pre-salary-sacrifice income.
Therefore novated leases can’t reduce super.”

This belief is only partially correct.

It comes from ATO Guidance Note GN 2020/1, which did close a loophole — but only for salary sacrifice into super.

It did not close the loophole for novated leases or other non-super salary sacrifice arrangements.

What GN 2020/1 actually says

The key sentence people usually quote is this one (GN 2020/1):

“From 1 January 2020, you calculate the minimum amount of super guarantee on the employee’s OTE base.
This is the sum of the employee’s OTE and any OTE amounts they sacrifice in return for super contributions.”

That part is correct.

However, the very same document goes on to say (emphasis mine):

“Calculation of super guarantee relating to other sacrificed amounts (such as salary sacrifice arrangements for cars, property or expense payments) are not affected by these changes.”

In other words:

  • Salary sacrificed into super → must be added back for SG calculation
  • Salary sacrificed into novated leases → does not have to be added back

This is not interpretation. This is the ATO’s own wording.

The Sharon example (straight from GN 2020/1)

GN 2020/1 then gives an explicit worked example that removes any ambiguity.

Sharon has a weekly wage of $2,000, which is entirely OTE.
She sacrifices: - $300 per week into super, and
- $200 per week towards a novated car lease.

Before 1 January 2020

  • Employer calculated SG on $1,500 ($2,000 − $500)
  • SG = $1,500 × 9.5% = $142.50

From 1 January 2020

  • Salary sacrificed into super must be added back
  • Salary sacrificed into novated lease does not

Sharon’s OTE base becomes:

  • $1,500 (post-sacrifice wage)
    • $300 (super sacrifice)
  • = $1,800

SG obligation:

  • $1,800 × 9.5% = $171

Notice what did not get added back:

  • The $200 novated lease sacrifice.

The ATO could not have been clearer.

Source: GN 2020/1
https://www.ato.gov.au/law/view/pdf/gdn/gdn2020-001.pdf

What this means in practice

Legally, under current ATO guidance:

  • Employers must calculate SG on pre-sacrifice income for super sacrifice
  • Employers may calculate SG on post-novated-lease income for novated leases

There is no requirement for them to add novated lease amounts back.

What most employers actually do

In practice:

  • Most employers still pay SG on your pre-novated-lease salary, which is beneficial for employees
  • However, some employers do not

Based on:

  • repeated reports in forums and comment threads, and
  • a poll I previously ran in an EV Facebook group,

around ~5% of respondents reported that their employer calculates SG on post-novated-lease income.

This is a minority, but with significant impact.

Why this matters financially

If your employer calculates SG on post-NL income:

  • your compulsory super contribution is lower
  • the impact compounds over decades
  • the loss can easily exceed $1,000+ per year.

This potential loss is rarely disclosed clearly in novated lease marketing.

This is a payroll risk, not a novated lease feature

To be clear:

  • this is not caused by novated leasing itself
  • this is a payroll policy choice made by your employer

Two employees on identical leases can have different outcomes depending purely on payroll implementation.

What you should do before signing

Before committing to a novated lease, ask payroll explicitly:

“Is my super guarantee calculated on my pre-novated-lease salary, or post-novated-lease salary?”

If you don’t get a clear written answer, assume nothing.

Key takeaway

If you remember nothing else:

While most employers pay the same amount of super after novated lease, a minority reduce their super contribution due to the use of post-NL income figure in the calculation.

Most employers still do the “right thing” for employees.

But legally, they don’t have to — and some don’t.

That makes this a real, if uncommon, risk worth understanding before you sign.

Optional Support

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