Love your car? You don't have to give it up to save on tax.
That's one of the biggest myths about salary packaging. Most people assume it only works if you're buying something new.
It doesn't. If you already own a car you're not ready to part with, an associate lease can still get you into salary packaging, running costs and all.
The Myth That Stops People Salary Packaging
Ask most drivers about salary packaging a car and they'll picture a shiny new vehicle straight off the lot.
That assumption makes sense. Most of the marketing is built around new cars. But it also leaves out a large group of people: anyone who already owns a car they like and has no plans to trade it in.
If that sounds like you, you may have written off salary packaging altogether. That's exactly the gap associate leasing was built to fill.
What is an Associate Lease?
An associate lease is an arrangement where someone close to you, usually a spouse, partner or other relative, leases your existing or replacement car to your employer. Your employer then makes that car available to you through a pre-tax salary sacrifice arrangement.
In simple terms, your associate becomes the lessor, your employer becomes the lessee, and you keep driving the car exactly as you were before.
How Does It Actually Work?
Once the lease is in place, your running costs are paid from your pre-tax salary. Depending on your arrangement, that can include:
- Fuel
- Servicing and maintenance
- Insurance
- Repairs
Because these payments come out before tax, your taxable income goes down. You also stop paying GST on those running costs, which adds up over the life of the car.
Who Can Be Your Associate?
Your associate doesn't have to be a partner, although that's the most common setup. It can also be:
- A spouse
- Another relative
- A family trust
As long as the relationship fits the criteria, the arrangement can be built around it.
Does It Work With Every Car?
Yes, and older cars often come out ahead. That's because Fringe Benefits Tax (FBT) is calculated on the market value of the vehicle. An older car with a lower market value can mean a lower FBT liability, which works in your favour rather than against you.
The exact numbers depend on your car and your circumstances, so it's worth checking with a provider directly. You can find the ATO's own explanation of how car fringe benefits are valued on the Australian Taxation Office website if you want the details from the source.
Associate Leasing vs Sale and Leaseback
If leasing through someone else doesn't suit your situation, there's a similar option worth knowing about. Instead of an associate holding the lease, you sell your car to a finance provider and lease it back.
The tax benefits are similar, but the structure is different. You can compare associate leasing and sale and leaseback here to see which one fits your situation better.
What Are The Key Benefits?
For a lot of people, buying new isn't the priority. They're happy with the car they've got. They just want a simpler, cheaper way to run it.
An associate lease can help with:
- Reduced taxable income through pre-tax salary deductions
- GST savings on running costs like fuel, servicing and insurance
- One regular payment instead of scattered bills
- Keeping the car you already know and trust
For many households, it can be a practical way to make the budget work harder without changing what's in the driveway.
Ready to Save on the Car You Already Own?
If you've been holding off on salary packaging because you didn't want to buy a new car, associate leasing solves that problem. You keep the car you know, reduce your taxable income, and stop paying GST on running costs.
Want to see what it looks like for your own car? Get a quote or read more about how an associate lease works before you decide.