A novated lease is a tax-efficient method of purchasing a new or used car. An employee must make up a payment agreement with their employer upon their salary, to lease the vehicle.
At the end of the lease period, the employee is under no obligation to purchase the car.
Disbursements on the lease are deducted from the employee’s pre-tax payment, successfully lowering one’s taxable income, and necessitating the payment of lower income tax.
Benefits of Novated Lease
The advantages vary depending on how your lease is set up. Some financial arrangements may combine car expenses like enrolment, fuel, tyres, and insurance so that your repayments also cover these.
Some employers might also permit you to use after-tax money to settle a portion of your novated lease.
The advantage of this is that if you aren’t paying the highest marginal lease rate, you might not have to pay marginal benefits tax to your employer from your pre-tax payment in addition to the novated lease payments.
Novated leases essentially imply that workers’ transportation expenses are free of goods and services tax (GST).
The finance provider pays the GST that you would ordinarily be required to pay on the purchase price and is eligible to make an input tax rebate claim.
You can find a third party for novated lease through the Bleen online directory. They provide leads for local businesses and trade services from the Australian local market.
Check their blog section to know more about Novated Lease pros and cons. Their informational bog section has helped any customers in making wise decisions and choosing the right service.
Process of Novated Lease
- You sign a lease agreement with a bank or a finance company.
- You and your employer engage in a “salary sacrifice” agreement to cover the repayments under the novated lease out of your pre-tax income.
- Your pre-tax income is used by your employer to make payments to your finance company on your account.
- If you move jobs, you can either keep driving the car while making payments on your own or transfer the agreement to your new employer.
What is Included in Novated Lease?
You are given a fuel card so you can experience cashless fuelling at any time.
· Maintenance and Repair
To guarantee that any work is required and accomplished at the most competitive price, vehicle servicing is also included and is checked and authorised by a team of experienced mechanics.
Initial enrolment and yearly extensions. This means that since the registration and CTP are already paid for, there is no need to find the money when they are due each year.
The advantage of the lease also includes insurance with affordable premium.
Additionally included are any replacement batteries, windscreens, or tyres you might require throughout the period.
· Roadside Assistance
The maker of the vehicle offers free roadside assistance, and lease payments are only added when the manufacturer’s roadside assistance does not cover the entire lease term.
However, these conditions can change depending on the employer and third-party lease company.
Some conditions are included while some are rejected. Hence, it is always wise to confirm all features and process included in your novated lease.