Novated Lease
The Novated Lease agreement is a tri-party agreement between the employee, the employer and the financier. The repayments are deducted from the customer’s gross taxable income, therefore reducing the amount of tax that you are required to pay.
Non Maintained Novated Lease
A Non Maintained Novated Lease is where the repayments of your finance are taken out of your pretax salary by your employer, who in turn makes the repayments to the financier on your behalf.
Fully Maintained Novated Lease
A Fully Maintained Novated Lease is where the repayments and all associated running costs of your car, such as insurance and petrol, are taken out of your pre-tax income and in turn your employer makes the repayments on your behalf.
Who is Eligible for a Novated Lease?
Many companies offer a salary package to entice and keep good employees. Provided an employee is on wages, they are eligible for a Novated Lease. In most cases, the Novated Lease is a much better option than providing a company car.
Novated Lease Benefits
- The repayments are taken from the employees gross salary, reducing their taxable income.
- Residuals/Balloons can be structured to reduce the repayments.
- Fixed monthly repayments.
- Transferable from one employer to another upon a job change.
- No risk of residual for employers as the employee pays a shortfall if the market value of the car is less than the residual.
- Higher staff retention through offering salary packaging.
Novated Lease "Tax Implications"
Under a Novated Lease agreement GST is charged on the monthly repayment. This may be claimed as an input tax credit provided you are registered for GST. GST is also payable on any residual value at the end of the contract but this is the responsibility of the employee.
Other Car Finance Options
You may also want to consider a Finance Lease, Hire Purchase or a Chattel Mortgage as other Car Finance options.
