Novated Leasing

Novated Leasing

Novated Leasing


My question is regarding novated leasing of cars, in which the instalments are deducted from pre-tax income. The issue is that my salary is above a certain bracket, because of which I am paying 43% tax on my salary. And all my monthly expenses like Car maintenance fuel, registration renewal, tyre change, services etc I am funding from my post tax income. Novated leasing option can help reduce my annual pre-tax income as my company will be paying the car instalments from my monthly salary before deducting the tax (pre-tax income). This means that I will be paying less tax now. Is novated leasing allowed for me in this case? I am based in Australia and I appreciate your prompt response.

بسم الله الرحمن الرحیم


In principle, it is permissible for the employer to pay for the car lease and running costs from your salary and thereby reduce your tax burden. It must also be ensured that the terms of the contract are compliant with Shariah, for example that it does not combine lease and purchase of the car in one transaction.

عن أبي هريرة قال: نهى رسول الله صلى الله عليه وسلم عن بيعتين في بيعة، رواه النسائي (٤٦٣٢) وصححه الترمذي (١٢٣١)۔

Allah knows best

Yusuf Shabbir

18 Muḥarram 1445 / 5 August 2023

Approved by: Mufti Shabbir Ahmed and Mufti Muhammad Tahir