What is a novated lease?
A novated lease is a three way agreement (“novation agreement”) between an employer, employee and lease company, under which the employee leases a vehicle from the lease company, and employer agrees to take on the Employee’s obligations under the lease
The employer then makes the lease payments on behalf of the employee, and deducts them out of the employee’s
Pre-tax income (known as salary packaging a vehicle).
If the employee ceases to be employed by that employer, or the lease agreement ends, the employee retains the
Vehicle but all obligations assumed by the employer under the novation agreement revert back to the employee.
Benefits for the employee:
Potential for significant income tax savings
End of lease profit
Savings on GST that would normally be incurred on vehicle expenses
Access to volume discounts under this scheme
More flexibility in the choice of a car compared to a company car arrangement
Vehicle stays with the employee and can be transferred to a new employer
Benefits for the employer:
A way to provide an effective increase in employees’ salaries with no or minimal cost to the business
Potentially a cost effective alternative to operating a fleet of company vehicles
The business does not assume any risk for the vehicles
The employee vehicles are “off balance sheet”
Fully Maintained novated lease
- Fuel & Oil
Servicing and Maintenance
The Key Features of a fully Maintained Novated Lease are:
Finance 100% of the vehicles value, flexible terms of 1-5 years.
Fixed Residual. A residual is set by the lease provider and is calculated using the ATO depreciation guidelines.
Package Options. Choose from a complete fully maintained or partly maintained option.
Flexible Repayment Options. Repayments can be adjusted immediately if usage or running costs increase or decrease.
Flexible Fuel Card. A fuel card that is valid anywhere a Visa Card is accepted.
Own account Login. Get your own online account login from anywhere you can access the internet.
Non Maintained Novated Lease
Under a Non-Maintained Novated Lease the lessee is responsible for all maintenance and other running costs of the motor vehicle.
Under a Novated Finance Lease arrangement the client has full use of the vehicle for a specified term in return for monthly repayments. At the conclusion of the term full ownership of the vehicle will pass from the Financier to the client after payment of the residual value.
There are four variables to consider as follows:
The Finance Term
The Key Features of a Non-Maintained Novated Lease are:
No finance payout penalties
It’s a tax effective way to lease a vehicle
You get total flexibility in choice of vehicle
- Your vehicle can be used 100% for private use
Access to fleet discounts for all new cars
Substantial GST savings