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. Use our Novated Lease Calculator to work out your savings.

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.