What Is novated leasing?For your employees
In a nutshell, novated leasing is a tax-effective agreement that you negotiate with a provider (such as LeasePlan) for your employees so they may lease a vehicle of their choice when, and if, they choose to do so.
The employee gets to finance the vehicle and its operating costs with a combination of before and after-tax salary.
The obligation for the payment of lease rentals is transferred (another word for ‘novated’) from your employee to you, as the employer, for the term of the agreement. You arrange the necessary deductions via payroll on behalf of the employee, and then you pay the finance and operating costs directly to your novated lease program provider.
Your employee retains ultimate responsibility to make any payments under the lease in the event that they leave your organisation or if you fail to make their payments.
So, what’s in it for you?
As an employer, you are offering your employees a significant benefit (i.e. motor vehicle) that can be used by both them and their family on a daily basis, one that also impacts positively on their salary package. Providing such a benefit is cost-neutral to you.
Not only is this a cost neutral benefit for the employer to provide, you also gain:
- Payroll tax reduction
- Workcover calculation savings
- Salary packaging payroll integration
- LeasePlan account manager support
There are some misunderstandings about novated leasing:
It’s not just for people who drive lots of kilometres.
You get the same tax benefits no matter how much or how little you drive.
It’s not just for employees who earn lots of money.
In fact, the benefits are better for everyone below the top marginal income tax rate.
It’s not just for new cars
You can lease second hand cars too.
It’s not too expensive
If the numbers look big versus other car buying options, don’t forget to include fuel, insurance, servicing, replacement tyres… it all adds up. Novated ends up being significantly cheaper.
What is included in a novated lease?
A good novated lease will bundle all vehicle-related expenses into one monthly payment.
This means your staff will not have any nasty bill shock when insurance or registration is due, or at scheduled service times.
As well as the finance component on the car, the payments on a LeasePlan novated lease will cover:
Your employee receives a fuel card so they can fill up anytime and enjoy cashless driving. All fuel is covered in their payments.
- Repairs and maintenance
Vehicle servicing is also included, and is checked and authorised by a team of qualified mechanics to ensure any work carried out is necessary and completed at the best price.
- Registration and CTP
Initial registration and annual renewals. That means there is no need for your employee to find the cash when the registration and CTP is due each year because it’s already covered.
- Comprehensive insurance
Insurance with competitive premiums is also included as part of the packaging benefit.
- Tyres, batteries and windscreen
Any replacement tyres, batteries or windscreens an employee may need during the term are also included.
- Roadside assistance (RA)
Roadside assistance is provided complimentary by the vehicle’s manufacturer, and is only included in your employee’s lease payments when, and if, the manufacturer’s roadside assistance does not cover the full lease term.
What are the benefits for the employee?
- Tax-effective payments of lease and operating costs;
- Save GST on car purchase, fuel, servicing, parts and labour;
- Savings above retail on operating costs (fuel, maintenance, repairs, etc.);
- Choose any car (new and used); and
- A potential lump sum benefit if the vehicle is sold at the end of the lease.