Question Summary:
Is it permissible to take Novated Lease in Australia?

Question Detail:

Is it permissible to take Novated Lease in Australia. www.fleetplus.com.au Novated lease is a contract between employee, employer and leasing company. We only make one final payment and do not sign anything relating to interest. It is deducted from Pre-tax salary.

Answer :

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

A novated lease is simply a three-way contract between a finance company, an employer and an employee. The employer is essentially an agent for the employee in deducting the rentals from the salary of the employee and paying the finance company. The employee can potentially save on GST and tax charges. According to the information provided, this contract would be permissible subject to other terms and conditions of the contract being Sharia compliant.

We advise you to refer to your local Muftis to analyze the contract as they are in a better position to understand the local laws and their implications. If need be, the local Muftis may then correspond with us further.

And Allah Ta’āla Knows Best

Checked and Approved by,

Mufti Ebrahim Desai.