Nowadays there is a very popular method of getting the car financed among the corporate employees; and that is Novated Lease. A novated lease is a three way contract between your employer, you and the finance company.

In such an arrangement, your employer pays the monthly payments as per the agreement on behalf of the employee through salary packaging deductions.

If the employee leaves their current employment where the car is novated, due to any reason or the agreement is squared up, the Novation ceases and then the residual finance becomes the employee’s liability.
This sort of an arrangement has unique benefits for both employees as well as for the employers.

For Employees:

  • Choose any vehicle, new or used
  • You have 100% control on the vehicle.
  • The repayments are made out of your pre-tax income.
  • If you shift your job, you can even transfer your novated lease too.

For Employers:

  • There are no surplus vehicles even if the employee leaves.
  • Employer can offer a more attractive remuneration package.
  • In comparison with company owned cars, savings in both cost and time.

Tax implications:

  • GST is deducted on a monthly basis as the employer is registered for GST, they can claim this back as an Input Credit.
  • GST is also charged on the residual finance value, and the employee is responsible for paying the GST at the end of the agreement.
  • Fringe Benefits Tax (FBT) is payable by the employee.