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What is a Novated Lease?
A Novated Lease is a three-way agreement between an employee, their employer and the finance company. The Novated Leasing of a car can have significant advantages for both Employees and Employers. A Novated Lease is one of the most economical options for purchasing and operating a motor vehicle. Normally you pay for all of your car expenses with your income after tax has been taken out from your employer. With a Novated Lease, you save money by paying for these expenses with a combination of your before and after tax pay through Salary Packaging. This reduces your taxable income, so you pay less tax. A Novated Lease will:
- save you money by reducing the amount you pay to the tax man
- you don’t pay GST on your running costs such as fuel, servicing, lease repayments, insurance and other normally GST inclusive vehicle expenses
- reduce budget stress and cash provision for your expenses automatically comes out of your wage
- give you unrestricted use of your vehicle, whether for work or personal use
What are the Benefits of a Novated Lease?
Novated Leasing offers many benefits for Employees including:
- You save money because the majority of your vehicle costs are paid from your pre-tax income
- You own the car. The vehicle is yours to use 100% of the time and there are no restrictions on who can drive it (except for your specific insurance policy)
- You do not pay GST on expenses
- Any profit on the sale of the vehicle is yours tax-free
- Lease repayments are fixed for the term of the lease with no interest rate changes
- Choose your lease term from 12 to 60 months
There are also multiple benefits as an Employer.
How does a Novated Lease work?
Salary Packaging means you can pay certain expenses out of your salary before you pay tax. With a Novated Lease, a portion of your monthly lease payment and associated running costs are deducted from your pay before tax. The ability to Salary Package vehicle expenses is a benefit that may be offered by employers to their staff. You can select a vehicle that suits your lifestyle and can purchase the vehicle through a car-yard or private sale. At the end of the lease period, you can:
- pay out the residual value of the car
- refinance the residual
- simply sell the vehicle and pay out the residual, or
- trade in the car and get a new one
The Simple Steps to Arranging a Novated Lease
Arranging to Salary Package a vehicle via a Novated Lease is not difficult – just follow these simple steps:
- We ask you some questions to let us assess if a Novated Lease is right for you and provide a quote to show you the estimated tax savings
- Over the phone, we gather the necessary information from you to begin the process
- We then email a finance application to obtain pre-approval before you start shopping for a car
- Once we have obtained the finance pre-approval you can look for your new car
- When you find your new car, the documents will be drawn up
- Once you have signed these and returned them to us, we then process and forward to the relevant people to finalise
- Your employer provides final authorisation for your Salary Packaging
- You will be advised that your Novated Lease is ready to commence so that you can organise picking up your car
- At this stage, we will also outline your tax savings and let you know which payroll date your packaging will begin
For convenience, a Fuel card as part of your Salary Packaging will be ordered at this time. If you are looking at buying your next vehicle, contact FAA to find out how we can assist you to save money.
Under a FAA Fully Maintained Novated Lease, all operating costs for the vehicle are included as part of your Salary Packaging. Operating costs that can be packaged include:
- Lease Rental (Repayments)
- Fuel and Oil
- Service and Maintenance
- Comprehensive Insurance
- Other types of Insurance (eg: Tyre & Rim, Gap and more)
- Roadside Assistance
FBT Status: Full FBT
|Particulars||Jane (Packaging)||Jack (Not Packaging)|
|Less Salary Packaging||-$5,863||–|
|Income Tax & Medicare Levy||$8,499||$10,522|
|ECM (Employee Contribution after Tax)||$3,755||–|
|Net Pay (annum)||$36,883||$44,478|
|Net Disposable Income (annum)||$36,883||$34,474|
|Net Disposable Income (weekly)||$709||$663|
|Tax Benefit (annum)||$2,409||–|
|Tax Benefit (weekly)||$47||–|
Other expenses which can also be reimbursed:
- Paint Protection
- Rust Proofing (not removable)
- Window Tinting
- Car Washing and Detailing
- Car Air Fresheners and Deodorisers
- Protection for Fabric Interior (not removable)
- Extended Warranty for Novated Lease Vehicle
- Any expense required to run the Novated Lease Vehicle (eg: Fuel, Maintenance, Oil, Radiator Coolant)
- Replacements (eg: Tyres, Windows)
- Excess on Insurance
- Registration (including transfer costs if any apply)
- Damages or Repairs (Conditions Apply)
With a FAA Fully Maintained Novated Lease you can structure in to suit your lifestyle. Through FAA’s advice, we can ensure your options are explained to you so that you can make an informed decision that truly benefits your personal situation.
Being able to use a fuel card is another great benefit of a Novated Lease. To fill up with a Fuel Card, simply present your card at participating service stations to quickly and easily purchase fuel. These cards are widely accepted and are an easy and quick way to purchase fuel. Depending on your Administrator, you may also be able to pay for your maintenance and services at participating organisations, and even tyres. FAA provides a Fuel card(s) which is used as a debit card at all fuel stations, where a Fuel card is accepted.
Your package provides a budget estimate for the total costs associated with running your vehicle for the kilometres you have nominated. If the kilometres traveled vary significantly, we can adjust the budget to meet the changed circumstances. FAA calculates the budgeted costs of servicing, tyres and fuel from your nominated estimated kilometres. Realistic estimated kilometres are an important factor in determining your package costs. Should your nominated kilometres change throughout the term of your Novated Lease, please contact FAA so that your budgeted amounts for your expenses can be amended.
How can we help you?
Contact us today to organise an initial appointment with a Salary Packaging Specialist.
The specialist can provide a free financial assessment and evaluate the impact on your individual circumstances.
We provide a holistic service and can assist you in all areas of your financial life.