What is a Novated Lease?

A novated lease is a way in which you can finance a new or used car. It is a finance agreement used along with salary packaging, simply meaning that your employer will pay for your car lease and car running costs out of your salary package through a mixture of pre-tax and post-tax salary deductions.

Your employer is eligible to take money directly from your pay to make payments for your vehicle. Some of this money is taken before you are taxed on it; therefore, you do not have to pay tax on that portion of your income within the year. This reduces your taxable income and, in succession, increases your disposable income.

Fringe Benefits Tax (FBT) is the tax that is applied to benefits that you receive from your employer that is not in the form of cash salary or wages. Novated leases are a benefit outside of these forms and are, therefore, subject to FBT. To cancel out FBT, your deductions can be constructed to include a set fragment of your post-tax salary. Doing so will reduce the taxable value of the car and reduce FBT to nil.

With a novated lease, you are not limited to any particular car type, make, or model – unless otherwise stated by your employer. Although in most cases, you are free to select any car you wish to lease, whether it be new, used, or even your current car. You are also not required to pay GST on the purchase price of a new car, ultimately saving you thousands of dollars in upfront costs that you otherwise would have to pay.

Do you need a Novated Lease?

If you are a permanent employee looking to purchase a vehicle, you’ve come to the right place. A novated lease agreement can place you in the driver’s seat and save you money in the process. Speak to one of our professional finance specialists today!

Contact Us

Other Types of Asset Finance

Equipment Finance Loans

While most business loans can be used for the purpose of purchasing equipment, the Equipment Finance loan is specifically designed for that purpose as a secured loan backed by the piece of equipment as the collateral asset, which allows for a lower interest rate to apply to the loan.

Chattel Mortgage Loans

A chattel mortgage is essentially a car loan specially drafted for business purposes. In the same manner as a car loan, the lender will provide funds or “mortgage” to purchase the vehicle or “chattel” and will use the purchased car as a security. Once the loan is paid in full, you take full ownership of the car.