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Why novated leasing is poorly regulated

A question that comes up repeatedly is:

Why does the government allow novated lease companies to get away with practices
that would be unacceptable in other areas of consumer finance?

The uncomfortable answer is that novated leasing sits in a regulatory no man’s land.

Novated leases fall outside two regulatory frameworks

Novated leasing manages to avoid meaningful regulation for two separate reasons.

1. Not a “financial product” under the Corporations Act

Under the Corporations Act 2001, many financial products (e.g. managed funds, superannuation, insurance, derivatives) require:

  • a Product Disclosure Statement (PDS), and
  • ongoing disclosure obligations around fees, risks, and conflicts of interest.

A novated lease is not classified as a financial product under this Act.

As a result:

  • no PDS is legally required,
  • no standardised disclosure of risks,
  • no obligation to clearly explain fee extraction or conflicts of interest.

2. Not a “credit product” under consumer credit law

At the same time, novated leases are also not considered consumer credit in the usual sense.

They therefore sit outside the scope of the:

  • National Consumer Credit Protection Act 2009, and
  • related responsible lending and disclosure rules.

This means requirements that apply to loans such as:

  • standardised comparison rates,
  • consistent disclosure of total cost of credit,
  • restrictions on how interest and fees are presented,

do not apply to novated leases.

The result: minimal oversight, maximum flexibility for providers

Because novated leasing is neither:

  • a regulated financial product, nor
  • a regulated credit product,

novated lease companies operate under far lighter regulatory scrutiny than other consumer finance providers.

In practice, most novated lease arrangements involve only:

  • a quote,
  • a salary packaging agreement, and
  • a lease agreement with the financier.

A Product Disclosure Statement is typically not provided.

Even the documents that are provided are:

  • not standardised,
  • not directly comparable between providers,
  • and often inconsistent in how key figures are disclosed.

Why this matters in practice

This regulatory gap allows for a level of opacity that would not be tolerated elsewhere, including:

  • inconsistent definitions of “effective interest rate”,
  • selective inclusion or exclusion of:
    • brokerage,
    • commissions,
    • admin fees,
    • insurance premiums,
  • unclear inflation of the “financed amount”,
  • marketing that emphasises “tax saved” while failing to disclose that this is not the net saving.
  • downplaying risks and caveats.

None of this is necessarily illegal; but much of it would be much harder to get away with if novated leases were regulated like other consumer finance products.

The practical implication for employees

For now, novated leasing continues to exist in a space where:

  • providers can extract significant margin,
  • disclosure standards are low,
  • and consumers are expected to “do their own homework”.

Because the system does not protect you by default:

  • you must assume marketing is biased,
  • you must dissect potentially incomplete or misleading headline figures,
  • you must see through fallacious conclusions, and
  • you must anticipate and mitigate all potential risks proactively.

This guide exists precisely because the regulatory framework does not do this work for you.

Key takeaway

If you remember nothing else:

Novated leasing is consumer-facing, yet largely unprotected by the consumer safeguards that apply elsewhere, creating fertile ground for opaque and misleading practices.

Optional Support

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