Novated Leasing of cars offers considerable taxation benefits.
A Novated Lease agreement is entered into between the employee, financier and employer. The employer pays the lease instalments and reduces the pre-tax salary of the employee by the lease instalments (less GST) and fringe benefits tax.
The benefits to the employee are as follows:
- It is a form of salary packaging that in most cases increases your net after tax income.
- You can generally select the car of your choice. It is also possible to have a 2nd car under a Novated Lease.
- There is the opportunity of making a profit on the sale of the car at the termination of the Lease.
- The GST payable on the lease instalments and running costs of the car are an input credit for the employer and thus not payable by the employee.
The benefits to the employer are as follows:
- The outstanding Lease facility is not shown on the Balance Sheet.
- Repair costs are often reduced as the employee has a vested interest in looking after the car.
- If the employment terminates, the employee becomes responsible for the lease payments – thus no unwanted company cars.
*The information provided does not take into account your specific circumstances. We strongly urge you to consult your tax adviser regarding any taxation matters.