Car lease from Lease 4U

What is a novated lease?

A Novated Lease is a three-way arrangement, between a financier, employer and the employee. The employee chooses the vehicle and the finance company 'novates' this agreement to the employer. The employer assumes responsibility for the monthly lease payments, this is deducted out of the employees gross salary (before tax). This car can be driven for both business and personal use; it offers great benefits to both the employee and the employer.

Major Benefits for the employer novating a vehicle

• The main benefit being that employers are able to offer employees the extra incentive of a car in their remuneration/salary package.

Other benefits for the employer that a novated lease includes are;

• Removes the necessity of recording the car as an asset or liability in the business;

• Offers an income tax deduction for all payments made under the agreement, including lease rental payments;

• Removes the need to manage a company car or fleet of vehicles;

• Removes the responsibility of making lease payments away from the employer as soon as the employee leaves their job.

• Can offer employers, if registered for GST, the ability to claim an input tax credit on the GST paid on the lease, (there are exceptions to this – contact us for more details)  

Benefits for the employee novating a lease

• The main benefit for employees is that they can choose the car they want and gain tax savings through salary sacrifice arrangements, as the lease payments are taken out of their pre-tax income

Other benefits for the employee that a novated lease includes are;

• Employees can use the vehicle for both work and private purposes; 

• Employees can decide to own the vehicle outright at the end of the lease term.

What are the different types of novated leases available to me?

• Novated finance lease – this is an agreement where just the vehicle is leased (View offers)
• Fully maintained novated lease – this is an agreement where the vehicle and its operating costs are included and wrapped up into the lease and just a monthly payment is made
• Fully maintained novated operating lease - this is an agreement where the vehicle and its running costs are all included and wrapped up into the lease, and the residual value (the end sale price of the vehicle) risk is assumed by the lessor.

Fully maintained novated leases and fully maintained novated operating leases are normally managed by a third-party lease management company.

What happens if the employee leaves their job?

If the employee leaves their current position they can take their car with them, if the new employer agrees to take over the novated lease, or they can arrange lease payments themselves for the rest of the arrangement.

Novated leases and Fringe Benefits Tax (FBT)

Please refer to the Australian Taxation Office – www.ato.gov.au or submit an enquiry and one of our team will explain the FBT allowances with you.