Novated lease

The novated lease product is specifically designed for the financing of motor vehicles included in salary packaging arrangements. It is a tripartite agreement between three parties, a finance company (Lessor), an employee (Lessee) and an employer (Payee).

The individual enjoys the use of a vehicle and the benefits of paying for the car from pre-tax salary.

The employer's commitment is to accept responsibility for payment of the lease rental under the novated lease, and often the running costs, which would normally be deducted from an employee's total remuneration package. On completion of the novated lease period or on termination of the employee's employment, responsibility for the lease reverts to the employee and the employer has no further obligation.

A novated lease may give rise to a fringe benefits tax liability and the Lessee should seek independent advice on this issue from their Accountant.

Benefits to the Employer:

• Taxation Benefits - the lease payments and running expenses are generally tax deductible
• No obligation for the vehicle on termination of the employee's employment
• The lease liability is off balance sheet
• Employment on-cost savings compared with paying the equivalent as a salary

Benefits to the Employee:

• Flexibility in choice and use of a car that may not otherwise have been provided
• Tax effective as payments are made from pre-tax earnings
• Payments can be structured to suit the employee's needs, budget and cash flow.
• Transportability of the lease on termination of employment
• The ability to have the car used by the employee's family, dependent on insurance restrictions
• The ability to make an offer for the vehicle at the end of the lease