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Novated leasing is a loan which involves an employee, employer and financier. A car lease is taken out by the employee with the employer taking on the financial obligation. Under the agreement, the employer will make monthly payments on the employee’s behalf through a salary sacrifice.
As a non-maintained novated lease, the employee would then take on the costs of maintaining the vehicle. That includes budgeting for the maintenance and other running costs. In other words, the employer’s only obligation would be to finance the vehicle. A fully maintained novated leave is when the employee doesn’t need to fork out these costs.
Although GST is not paid up front, it will still be charged on monthly payments and the good news is that this can be claimed as a tax deduction.
As mentioned, the employer will finance the lease while the employee takes on responsibility for the car. The employee will not receive any extras and the costs of fuel, tyres, servicing, insurance and more will all be handled by the employee. These costs are handled by the employee’s post-tax income.
This lease can be used to acquire both used and new cars with a value of more than $10,000 but is not payable upfront. Instead, it will be charged on the monthly payments making it a claimable tax deduction.
This type of lease can be beneficial to both the employees and employer. The employer gets to enjoy reduced administration costs, which can be high with company owned cars. Should the employee leave that place of work, the novated lease and all financial obligations cease to be assumed by the employer and are reverted to the employee. The employee therefore can retain equity accumulated by the vehicle.
Related reading: Learn about fully maintained novated leases
The calculator below will let you calculate and give you an indication of repayments and how much the lease may cost you. Once you have an idea of financial commitments, compare your figures with the car loans compared below
It is always important to compare your finance options from a range of lenders. The below table will give you an idea of the rates and fees for car loans in Australia.
Before you can apply for a non-maintained novated lease, first compare the options that are available from different lenders.
This lease is eligible for all employees as it is offered as an option with their salary package. The application will involve the employer who will take on the financial obligation as well as the employee who will take on all running costs and maintenance.
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