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What is a novated operating lease?

A novated operating lease is exactly that! It's the best of two types of car lease, a operating lease and a novated lease. It allows an employee to receive a tax benefit on a vehicle every time they get paid and at the same time, the employee has no residual risk for the car. The vehicle is just handed back to the finance provider at the end of the car lease term.

How does a novated operating lease work?

A novated operating lease is simple, get the go ahead from your employer, choose a motor vehicle, decide on the term and work out how many km's you will travel per year. Your employer will pay a monthly lease payment that includes all scheduled servicing and take this from your pre tax salary. At lease end, you just hand the motor vehicle back to the finance provider.

Residuals and terms

No need to worry about residuals and balloon payments as there is no risk to you! Just hand the motor vehicle back to the finance provider at the end of the term.

What are the benefits of a novated operating lease?

• Novated operating lease terms range from 24 to 48 months
• No capital outlay is required to fund the purchase of vehicles
• The fixed car lease rentals are on a single monthly invoice allowing easy and accurate budgeting
• Novated operating lease repayments are fixed for the term
• Employee receive's a tax benefit each time they get paid as the car lease cost is taken from their pre-tax salary
• There is a reduction in the time and expense of administration, especially when taken with full maintenance
• Car lease rentals are usually fully tax deductible (except for luxury vehicles)
• There are no costs or liability associated with vehicle disposal
• No residual risk or liability associated with vehicle disposal
• All scheduled maintenance and servicing is taken care of
• Vehicle acquisition by Aussie Car brokers
• We can have you in your new car within 24-48 hours
• You will receive great hands on personalised service from an experienced car leasing consultant

Who should consider a novated operating lease?

A novated operating lease should be considered for employee's travelling high km's in their car or for vehicles that have historically low resale values.

What are the tax implications of a novated operating lease?

GST is charged on the monthly novated lease payment and as long as the employer is registered for GST, they can claim this back on their BAS.

Fringe Benefits Tax (FBT) is payable on the motor vehicle, and this expense is normally passed on to the employee. The amount of FBT depends on the kilometres travelled each year or amount of business use. The higher the kilometres and business use, the lower the FBT.

Where the amount financed is below the Depreciation Limit ($57,123), the employer claims the novated lease payment as a business expense. Above the Depreciation Limit, they claim the interest charges and depreciation up to the value of the Depreciation Limit ($57,123).

Are there any other options?

If you are thinking about doing a novated operating lease, you may also want to consider a Finance Lease, Commercial Hire Purchase or Chattel Mortgage as other car leasing options.

Need further information?

Either complete our friendly enquiry form and we will call you shortly or call the number 1300 Car Lease (1300 227 532) and talk to an experienced car leasing consultant today.

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