Novated Leasing

Under a novated lease, you purchase the vehicle and then "novate" the finance agreement to your employer. As a result, your employer agrees to take on your obligations (repayments) to the finance company, and is responsible for all of the agreed vehicle expenses which are deducted from your remuneration as part of your salary packaging arrangement. You agree to "salary sacrifice" a portion of your earnings in return for the benefit of a car equal to that amount.

With a Novated Lease, the lease, running costs of the vehicle and Fringe Benefits Tax (FBT) are deducted from your pre-tax earnings, and PAYG income tax is calculated on your reduced salary. This can effectively increase your net disposable income as you pay less tax.

Novated leasing offers many benefits for employees including tax efficient structuring of your car expenses (by paying them from your pre-tax income, giving you the ability to choose your own vehicle (as opposed to being given a fleet car), providing you the ability to use 100% of the time, allowing you to move the lease around between employers and giving you the ability to potentially benefit from any profit realised on sale (over and above your payout figure).

Novated Leasing also offers a number of benefits for employers including the ability to provide more flexible remuneration to employees at little-or-no cost to your business, significant savings of time and money compared to the administration of a company fleet and the elimination of the residual-value risk of a company fleet. As the employer, you are not responsible for the vehicle if an employee leaves, and is not left with vehicles surplus to requirements and vehicles provided under a Novated Lease are "off balance sheet" - neither an asset nor a liability.