A novated lease is a three way arrangement between you (the employee), Leasecorp and your employer, whereby a vehicle is leased from the financier under a finance lease in your name, and novated (assigned) to your employer, by way of a novation agreement. The employer then pays the cost of this lease. In addition they may pay all running costs associated with the running of the car. The total of all these costs is deducted from your gross salary, thus reducing your tax.
In most cases, it will be both cost and tax effective to own a motor vehicle as part of a remuneration package, due to the concessional taxation treatment of motor vehicles under the Fringe Benefits Tax legislation.
Benefits of a novated lease
Benefits of a novated lease for employees:
- Income tax savings
- Savings on GST that would normally be associated with vehicle operation
- Flexibility in the choice of vehicle
- Maintain control over the vehicle during and after employment (or with new employer)
- Known residual value on finance lease
- Choice of flexible novated leasing programs to suit your situation