Overview
Organizations may need to set up both Pre-Tax (Salary Sacrifice) and Post-Tax (Deduction) pay components for novated leases. In some configurations, only a Post-Tax deduction Pay Component Sub Type (PCST) exists (e.g. Novated Lease Post Tax Deduction), and a corresponding Pre-Tax Salary Sacrifice component must be created.
Novated leases typically require two components:
Pre-Tax Component – Salary Sacrifice, which reduces taxable income.
Post-Tax Component – Deduction, the after-tax repayment component, where applicable.
Step 1. Creating a Pre-Tax (Salary Sacrifice) Pay Component
Use this process to create the Salary Sacrifice component for the pre-tax portion of the novated lease.
1. Navigate to Payroll Admin → Payroll Setup → Pay Component Sub Types
2.Locate an existing Salary Sacrifice code, such as :
- Salary Sacrifice Fringe Benefit.
3.Click Actions > Make a Copy.
4.Update the Copied Record
- Rename to something identifiable (e.g. Novated Lease Salary Sacrifice)
- Ensure the configuration aligns with your business requirements
5.Set STP Type Code:
- Set to Other Employee Benefits (O).
📌 Special Case: Electric Vehicles
If the novated lease relates to an electric vehicle with no FBT, copy Salary Sacrifice Exempt Benefit instead of Salary Sacrifice Fringe Benefit.
Step 2. Creating a Post-Tax (Deduction) Pay Component
Use this process if a Post-Tax deduction component does not already exist or is not correctly configured.
1.Navigate to Payroll Admin → Payroll Setup → Pay Component Sub Types
2.Open an existing Deduction-type code.
3.Select Actions > Make a Copy.
4.Update the fields as required.
5.Save the new deduction code.
⚠️ Important: Do NOT copy Superannuation or Child Support codes when creating the deduction.
Step 3. Creating a Vendor / Payee Record
Use this process if a record for the novated lease provider does not already exist.
1.Navigate to Vendor/Payee setup.
2.Create the Provider Record
3.Create a record for the novated lease provider.
4.Add the required details :
- bank account information
- payment instructions
Step 4. Assigning Pay Components to the Employee
Once both components are created, assign them to the employee.
1.Go to the employee record.
2.Use :
- Create Salary Sacrifice for the pre-tax component.
- Create Deduction for the post-tax component.
3.Enter Required Details
- Start Date
- Amount
- Payee/Vendor (for deductions)
4.Save changes.
Reference guide:
11. Add Pay Components
✅ Notes
- Pre-tax and post-tax components must be configured separately
- Ensure correct STP classification to avoid reporting issues
- Always validate payroll impacts after setup