A Novated Lease is a three way agreement between:
The employee obtains from Leasecorp vehicle finance for the car of their choice for a fixed period of time. The employer then deducts repayments from the employees pre-tax salary, thus reducing taxable income.
If the employee resigns, the car and the lease is the employee's responsibility. The employer has no further obligation.
At the conclusion of the Novated Lease the employee has the option to purchase the vehicle for a pre-set residual, sell or trade the car. Any profit after the residual is paid belongs to the employee.
- The ability to cost effectively salary package the vehicle.
- The vehicle is owned by the employee not the employer.
- Majority of costs are paid in pre-tax dollars.
- Novated Lease can be tax effective.
- If employment changes the Novated Lease can be transferred depending on employer acceptance.
GST is charged on the monthly lease rental. As long as the employer is registered for GST, it can claim this back as an input credit. GST is also charged on the residual value of the lease. As the Novation reverts back to the employee at the end of the lease, the employee is responsible for the GST.
Fringe Benefits Tax (FBT):
FBT is payable on the vehicle, and this expense is normally passed on to the employee. The amount of FBT depends on kilometres travelled each year. The higher the kilometres, the lower the fringe benefits tax rate.
Who does a Novated Lease apply to?
Any employee who wants to include a motor vehicle in their salary package, and their employer offers salary packaging.
Want a fast quote of more information?
Contact our office on 1800 232 615, send an email to firstname.lastname@example.org or use our enquiry form on the right side of this page.