Novated lease
From Wikipedia, the free encyclopedia
A novated lease is a special kind of motor vehicle lease that is common in Australia that allows employees to operate personal motor vehicles in a tax and cost effective manner when compared with more traditional forms of leasing.
'Novated' refers to an agreement between the employer, the employee and the financier of the vehicle, whereby the employer agrees to meet the repayments of the finance lease while the employee remains employed. In return, the employee 'sacrifices' a portion of their salary to cover the cost of the finance.
Under this arrangement, certain benefits arise for both the employee and the employer including:
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[edit] For the employee
- possible significant income tax savings
- savings on GST that would normally be incurred on vehicle expenses
- Access to volume discounts if the employer has many vehicles under this scheme
- more flexibility in the choice of a car compared to a 'company car' arrangement
[edit] For the employer
- A way to effectively increase employees' salaries with no or minimal cost to the business
- A more cost effective alternative to operating a fleet of company vehicles
- employee vehicles are 'off balance sheet'
- Access to GST input credits for vehicle expenses
[edit] See also
[edit] External links
- Novated leases questions and answers from the Australian Taxation Office
- The Car Leasing Directory Compare major lease brokers.
