Novated Lease

A Novated Lease is a form of salary packaging and provides a good tax incentive to employees when taken as a salary sacrifice. With this type of lease, there is a three way agreement between an employee, an employer and the finance provider.

How Does It Work?

The employee leases a vehicle and the employer takes on the employees obligations of the lease and pays the monthly lease rentals and collects it from the employees pre-tax salary.

Features:

  • Fixed rates for the term of the lease
  • Ability to cost effectively package a vehicle
  • Choice of vehicle
  • Tax savings as repayments are deducted pre-tax
  • The novation can be taken on to your next employer
Minimum Amount: $20,000
Application Fees: $0
Available Terms: Up to 5 years
Rate Types: Principal & Interest (Fully Amortised)

Who Does A Novated Lease Suit?

A Novated lease suits any employee who wants to salary package a car. Their employer must be willing to offer the Novated lease as an option for employees and sign a deed of novation.

Taxation Implications

GST is also charged on the residual value on the lease, and as the novation reverts back to the employee at the end of the lease, the employee is responsible for paying the GST on the residual. GST is charged on the monthly Novated lease payment and as long as the employer is registered for GST, they can claim this back on their BAS.

Fringe Benefits Tax (FBT) is payable on the motor vehicle, and this expense is normally passed on to the employee. The amount of FBT depends on the kilometres travelled each year or amount of business use. The higher the kilometres and business use, the lower the FBT.

Where the amount financed is below the Depreciation Limit ($57,466), the employer claims the Novated lease payment as a business expense. Above the Depreciation Limit, they claim the interest charges and depreciation up to the value of the Depreciation Limit ($57,466).

Apply For A Novated Lease

Got all the info you need and ready to apply for a Novated Lease? Just complete our quick application form and one of PCL Moneys Novated Lease experts will get in contact with you.

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