A novated lease is a tripartite agreement in between an employee, employer and a lease company. The employee leases a vehicle from the lease company, the employer agrees to make the payments on behalf of the employee while they are employed with them, by taking the funds out of the employees pre-tax income. This makes it a very tax-effective way for you to indulge in purchasing a vehicle.
If the lease agreement aborts or the employee ends it to be employed by that employer, you then take over the lease repayments yourself and the employer is not longer obliged to carry on the novation agreement. This is a financial procedure for employees to buy a car in a tax effective manner through their salary package. It's a three way agreement between a employee, employer and a finance company.
Employees can roll all or some of the running costs into a fixed monthly payment that is deducted from their salary, making a Novated Lease simple and easy to use for employers and employees, where the commitment to meet the Novated Lease repayment is with the employer. Also the employer may pay all the vehicle running expenses regarded with car.
It is a salary sacrifice method to purchase and run a vehicle, new or used. A novation can suit drivers at all mileage and salary levels and the term may be from 1 to 5 years.
Novated Lease can offer various benefits to an employee like for example:
- Income tax savings
- No GST on automobile acquisition cost or operation costs – comprising utmost savings in fuel
- Liberty of vehicle selection
- Possible profit at lease conclusion
- Used vehicles can be entitled
- Sale and leasebacks acceptable
- Non-maintained or fully maintained deals
It provides various benefits to an employer and his business too, like:
- Smart employment and retention proposal
- Added importance for the recruits with no expenditure to the company
- Commercial choice for working fleets with no risk to the employer
- Flexibility in auto option and pay packaging, headed for the employees
- Meet the pay package and vehicle inclination of employees, exclusive of the trouble of maintaining a vehicle fleet, at the same time as considerably reducing administration expenses.
- In favor of accounting purposes, Novated Leases might improve accounts ratios and clear outstanding legal responsibility, should there be a change to the employee/employer circumstances
Most employees that benefit from novated lease or self employed loans are those who have part of their salary in a higher tax bracket as deductions for the novated lease and associated costs are taken out of their pre-tax salary. Thus, party, the employee and the employer come forward with this type of agreement.
In present times, saving money is essentially important and a novated lease calculator helps you to work out these savings error and hassle free.