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A Novated Lease is a 3-way arrangement between the employee, the employer
and the financier where the obligations
under the finance lease are transferred from the employee to the employer through
a Deed of Novation, and the employer
assumes responsibility for making the lease payments to the financier.
The Deed of Novation remains in force until the earlier of the end of the lease
term, or until the employee ceases
employment.
Fully Maintained Novated Lease
A Fully Maintained Novated Lease is an arrangement where all of the
operating costs of the motor vehicle are included as
part of your salary package. Operating costs that can be packaged include:
- Lease Rental
- Fuel & Oil
- Servicing and Maintenance
- Registration
- Tyres
- Comprehensive Insurance
- Roadside Assistance
- Car Wash
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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.
Flexibility of a Novated Lease
There are a number of benefits associated with novated leases, including:
- The employee can lease the motor vehicle of their choice.
- The motor vehicle can be leased where the private use of the vehicle is 100%.
- When an employee ceases employment, the responsibility for the lease reverts back
to the employee.
- The motor vehicle does not appear on the employer's Balance Sheet.
Tax Benefits of a Novated Lease
The concept of novated leasing is central to salary packaging arrangements between
an employee and an employer.
Under a salary packaging arrangement, an employee agrees to forego a portion of
their salary or wages in return for
benefits equal to that amount.
For a novated lease, the lease and running costs of the motor vehicle, and fringe
benefits tax (if applicable) are
deducted from the employee's pre-tax salary, and PAYG is calculated on the reduced
salary or wages.
The tax benefit of a novated lease arises from the concessional fringe benefits
tax treatment on the car, with the lease
and running costs being FBT exempt. Depending on the employee's individual financial
circumstances, salary packaging
a motor vehicle under a novated lease can have the effect of increasing an employee's
net disposal income.
Other Benefits of a Novated Lease
Other benefits of a Novated Lease include:
- The repayments are fixed over the term of the loan.
- The term of the novated lease ranges from 12 months to 60 months.
- As the financier is the owner of the motor vehicle, they claim the GST on the purchase
price, meaning that the
employee finances the GST-exclusive amount.
- Under a salary packaging arrangement, the employer is entitled to claim an input
tax credit for the GST components
of the lease payments and other running costs of the motor vehicle.
- If the employer passes back to the employee the input tax credits, the employee
is effectively paying the novated
lease and running costs net of GST.
To learn more about Novated Leasing download our:
Novated Lease Information Pack
Request a NOVATED LEASE QUOTE Online
or call our friendly finance consultants on 1300 132 700.
For more information on Salary Packaging or to obtain a Salary Packaging provider
please visit:
Southgate Salary Packaging Services
Disclaimer: We
recommend that prior to entering into any financial arrangement that you seek independent
financial advice.
The information contained herein is of a general nature only and does not take into
account your personal circumstances.
Southgate Financial Services Pty Ltd, its agents, employees and lenders accept no
responsibility for any loss that may arise.
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