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Novated Lease with Salary Sacrificing is a business finance facility that allows employers to provide cars for employees with the employees covering the costs through sacrificing part of their salary. It may sound complex, but our easy explainer sets out the details and the tax benefits for both parties. Those considering this option can work up rough repayment estimates using our business finance comparison rate calculator.
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Novated Vehicle Lease with Salary Sacrificing
Employers may suggest a Novated Car Lease to an employee as a way of providing the employee with a tax break and a fully maintained vehicle. In some circumstances, this may be considered as a way to retain staff where a salary increase is not feasible or as a performance bonus.
Employees may suggest this option to their employer as an option for them to obtain a new vehicle without having to take on their own finance obligation.
When monthly lease payments are all finalised, payment of the residual is arranged which finalises the finance arrangement.
When the lease is completely paid out, the vehicle ownership is signed over to the employee. The salary sacrificing term is over and wages payments and tax payable revert to normal arrangements.
Where the employee leaves the employ of the business prior to the end of the lease term, negotiations with employer and lender will be required to arrange transfer of the lease payments to the employee. Alternatively, the employee may forfeit ownership.
Novated Vehicle Lease: Features and Benefits
Arrangement can be instigated by employee or employer but must be agreed by both.
Employee chooses the vehicle.
Leasing quotes and offers sourced.
Leasing arrangement set up in the name of the employer business.
Employer meets the monthly lease payments and vehicle expenses and realises the relevant tax benefits including claiming GST.
Employer deducts the amount of those expenses from employee’s pre-tax salary to cover the costs.
By sacrificing pre-tax income, employee has potential to move to a lower tax bracket – pay less relative tax, receive greater percentage take-home pay and have a fully maintained car.
Lease payments are arranged at a fixed interest rate and fixed for the fixed term of the lease.
Leasing terms up to 7 years / 84 months achievable.
Residual option available in line with ATO criteria.
Novated Lease with Salary Sacrificing Explained
This calculator comparison chart is provided for general reference purposes only. It is not in any way intended as a loan application, it is not a quote for finance or any indication that an application has been received or approved. The repayments quoted may not include all the fees and charges that may be applicable. The interest rates and the repayments displayed do not account for any conditions pertaining to your individual loan application. Therefore the interest rate and repayment you may be offered may vary from the amount shown.
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