What is a Novated lease?

A novated lease is just a way of financing a car – but your employer makes the payments for you.

It’s a simple agreement between you, the Mylease and your employer. You buy the car, we pay for it and your employer makes the payments for you and takes the money out your pay before he gives it to you.

But finance is only one part of the car. In a novated lease you can finance your car with the running costs included…. and get a real tax saving, all at the same time.

You (the employee) take a lease with Mylease and then your employer deducts the money from your salary and makes the payments on your behalf. With the employer making payments on your behalf, the car is treated just like a company car and your employer will receive, and pass on to you, all the tax deductions that you would not ordinarily be entitled to.

Once the lease is setup and all costs are known, your employer will make the payments including GST on your behalf, and then claim the GST back from the tax office, you don’t pay the GST so right up front you will be saving all the GST charges. On top of that some or all of the money that is deducted from your salary by your employer will come from your pre-tax earnings which means a saving on your income tax as well.

Benefits of Novated Lease

The Novated Lease of cars can have significant benefits for both employees and employers. Commonly used as part of a salary packaging arrangement, a Novated Lease enables employers to provide a significant financial and tax benefit to their employees at little-or-no cost to the business.

Income Tax Savings

Employees receive significant tax advantages by salary sacrificing a portion of their pre-tax income to accommodate their vehicle under a novated lease.
The FBT (or the employee’s post-tax contribution to eliminate the FBT in the books of the employer) is calculated of the value of the vehicle; therefore, the majority of the costs associated with the lease repayments, maintenance, insurance, fuel and other running costs are paid pre-tax, which effectively reduces the employees gross taxable income and the actual amount of income tax payable.

GST Savings

Under a novated lease, the vehicle purchase price , the lease repayments and all vehicle running costs are GST exclusive to the employee.
The financier claims a tax credit for the GST included in the purchase price of the vehicle and the employer claims a tax credit for the GST included in the monthly lease payments and all the vehicle running costs. The benefit of these tax credits are passed on to the employee, essentially making a novated lease completely GST free (subject to a few limits, including the residual value of the vehicle – which will include GST when you finally pay it at lease end ).
This represents a significant benefit to the employee.

Choice of Vehicle

Any vehicle make or model can be chosen by the employee, including both new and used vehicles. It just needs to be kept in mind that when seeking to purchase used vehicles, the car cannot be more than 8 years old at the end of the lease; in other words, usually the car needs to be no more than 4 years old (although this will depend on how long you plan to have the lease term run).

Sale and Leaseback

Employees can take a novated lease on a vehicle they currently own. You sell your vehicle to Mylease for market value you can then use these funds for any purpose (investment, personal expense, debt consolidation or any other personal use). The vehicle is then leased back to you under a novated lease arrangement, using pre-tax salary sacrifice for all vehicle expenses.
Employees can purchase a vehicle from their company’s fleet as well, although FBT restrictions may apply in that scenario.

Novated Lease Benefits

Pricing Advantages

We offer real benefits and genuine savings to all our customers. As a private purchaser, employees looking to purchase new vehicles would only receive minimal discounts. Under our program, employees have the opportunity to lease the vehicle at a greatly reduced price by taking advantage of our volume purchasing power.

Budgeted Fleet Management

Employees will only pay for what they use in relation to vehicle expenditure; we budget for all vehicle running costs based on the employee’s anticipated annual kilometres. The pre-determined amount deducted from the employee’s salary (pre-tax) is credited to their vehicle operating account (with us) and all vehicle-related expenditure is then deducted from this fund. If an employee doesn’t spend their entire budgeted amount, we refund the excess (which will be taxed as ordinary income after being returned to the employee).

Additional Vehicles

In theory, there is no limit to the number of novated leases an employee can enter. The employer may however have specific policies or guidelines in place about this issue. By salary packaging additional vehicles the employee receives all the benefits associated with novated leasing on each vehicle, regardless of how many are leased in this manner. An example that is often relevant is salary packaging a second car for a family member.

Mylease Fleet Reporting

We offer "state of the art" Mylease online reporting portal provides significant details on the vehicle finance and operating usage and expenditure. Our portal can be accessed by the customer to update a range of detail including driver information, contact information and to seek reimbursement for unexpected personal vehicle expenses.

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