Novated Lease Car Lease
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Novated Lease

Novated Lease is a form of “salary packaging” . A Novated Lease allows an employee to lease a motor vehicle while their employer agrees to take on the employee's obligations under the lease, paying the monthly lease rentals from the employee's pre-tax income ("salary sacrificing" this income).

This is a tax effective way of acquiring a motor vehicle, popular with salaried employees.

If employment ceases for any reason during the lease period, or the lease agreement is finalised, the Novation ceases and the obligations assumed by the employer revert back to the employee.

Why consider a Novated Lease?

  • Ability to tax effectively package a vehicle
  • Select a car of your choice not that of your employer;
  • Portability - you can take the vehicle and lease with you if you change jobs
  • Terms range from 12 to 60 months
  • Stability of monthly repayments given that interest rates are fixed for the term of the lease
  • Tax savings as repayments are deducted pre-tax
  • Get to keep the car at the end of the lease period.


Tax Implications

Residual value on the novated Lease is also subject to GST. Given that the novation reverts back to employee ownership at the end of the lease, the employee is responsible for paying the GST on the residual.

You will also be charged GST as part of your monthly Novated Leasing payment. If your employer is GST registered, they can claim the GST paid back on their BAS.

Fringe Benefits Tax (FBT) is payable on the motor vehicle, and this expense is normally passed on to the employee. The amount of FBT depends on the kilometres you travelled each year or amount of business use. The higher the kilometres and business use, the lower the FBT.

Where the amount of the lease is below the Depreciation Limit, the employer is entitled to claim the Novated Leasing payment as a business expense. Above the Depreciation Limit, they claim the interest charges and depreciation up to the value of the Depreciation Limit





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