Advantages of Novated lease company in Australia

In Novated Lease Company the agreement is always between three parties, one is employer, another employee and third is leasing company.  It is very common in Australia for dealing with vehicles.  Novated leases performed for motor vehicles conducted between employee and employer for the payment of motor vehicle, paid by the employer from employee’s pre-tax income.  

In UK it is usually applied for the Novated car lease conducted between two parties.  But in Australia it is conducted for motor bikes and other vehicles also.  Here three groups are there, employer, employee and leasing company.  All the transaction is carried out from the employee’s pre-tax funds.  Employee agrees for this through bond and all connected transactions are made through this nominated account of employee.  The agreement is known as deed of novation.  

Australians usually like to have novated lease salary packaging due to the advantages they get through this package.  Vehicles got through this package attract fringe benefit tax in Australia.  It is treated concessional here; therefore it is one of way getting benefited by the tax.  

It is an effective way saving tax by Novated leases, as it covered the entire cost, depending upon the type of vehicle, distance traveled annually, method of Fringe benefit tax used, fee, charges and all other taxes used by the nominee.

It is extremely useful and beneficial method for the all those people involved here in the scheme.  It is beneficial for employee so that he can same tax.  It is beneficial for the employer as it can save transport expenditure for the company.  It is beneficial for the government as income panel pay the fees.  It is beneficial for Novated Lease Company as they collect fees and income is generated. 

Different Types of Novated Lease

There are basically two major types of Novated Lease -

1. Fully Maintained Novated Lease
2. Non-Maintained Novated Lease

A number of employers offer to give you an option while some other will offer you only one, or maybe don't offer Novated Leasing to their workers in any way. In case your company doesn't already offer you Novated Leases , or just gives you a very limited choice then you should consult with your current Stratton financial adviser.

1. Fully Maintained Novated Lease

Under this Fully Maintained Novated Lease, almost all operating expenses for the vehicle are included as a part of your current salary package . Below are the things that comes under Operating expenses-

Registration
Lease rental
Fuel and oil
Service & maintenance
Tyres
Comprehensive insurance and other insurances
Accident management
Operating Costs and Fringe Benefits Tax reporting

If you opt for this fully maintained novated lease then it will be good as you do not need to worry anymore about operating cost or expenses for your vechile as all the operating cost will be managed by the company on your behalf.

2-Non-Maintained Novated Lease-

If you opt for Non-Maintained Novated Lease you have to pay for all your vehicle maintenance and its running costs etc. and the only thing that will deducted from your salary package is the lease rental and any applicable fringe benefit tax.

Novated lease-A Tripartite Agreement

You must have heard that novated lease is mutually beneficial, in the sense that it profits employers as well as employees.  But what is the scheme really about? By way of this leasing scheme, you work out a tripartite agreement. Novated leases involve a conformity wherein lease obligations of an employee are taken over by his respective employer. As part of the agreement thrashed out, the financial company is found working in unison with the respective employer and the ones employed under him

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As an employee, you may be offered with the scheme of novated leasing. It can be a part of your car salary’s package. By means of the tripartite agreement worked upon, you will have your employer fulfilling your lease obligations. He/employer needs to make monthly payment to the company in charge of financial transaction. As part of novated carlease, you are given the option for selecting a vehicle. You have a wide array of option to bank on, and you can choose the one that suits you best. 

After purchasing the vehicle, you become a part and parcel of the mutually agreeable terms and condition. Though the vehicle is purchased in your name, employer takes upon himself the responsibility for repayment. Expenses related to the use and application of the vehicle is also provided for. But you might wonder, how does novated lease option work to the advantage of your employer? The employer stands to gain, as well. That’s because he is in with the option for deducting the lease payment from your net salary.

Novated lease- understand the concept and its associated implications

As an Australian, you must be pretty much acquainted with the term of novated lease. But even if you are unaware of the concept and implication, it is important for you to remember that this scheme of leasing is particularly predominant in Australia. Besides Australia, United Kingdom is also found making extensive use of this method of leasing. In case, you are not aware of the features and facets of novated leases, the blog will help you through its ins and outs.

Most business houses based in Australia are found dwelling on this scheme of leasing. By means of this scheme, an employer embarks upon the option for leasing, whereby a motor vehicle is put out for lease. The lease is sanctioned in the name of a member of staff by the respective business house. The novated leasing is facilitated by the business house who is supposed to have employed you. The monetary transaction of a novated car lease is managed by the respective employee. In other words, if you are one of the employees, your employer may choose to lease out a vehicle under your name. But at the end of it all, the responsibility is yours. As far as the modalities of payment are concerned, the dues are cleared from the pre-taxable income of the concerned employee.

Novated lease involves mutually agreeable terms and condition. The relevant terms and conditions are as much applicable to an employer as to an employee. The company responsible for leasing has an important role to deliver. In this way, a threefold scheme is thrashed out. As an employee you have roles to offer with regard to the deals of leasing. Similarly, the scheme is beneficial for your employer, as well. So, onus lies with the respective employer for taking on and looking after your obligations.

What is Novated Lease?

Novated lease is a common practice in Australia and UK, however the definition varies in procedural terms but the spirit of it remains the same. Let’s get some answers for the following questions-

1) what is novated lease? and 

2) how it is different in these two countries?

Novated car lease in Australia has become an increasingly popular option to finance vehicles over the recent years. It allows business’s in Australia to lease a vehicle on behalf of an employee. It is an agreement between the employee, employer and the lease company or the financer. 

Under this novated lease concept, employee can lease a vehicle from the lease company and the employer will agree to the terms and conditions of the lease contract. The employer then pays for the monthly instalments on behalf of the employee to the financer or the lease company, deducting it out of employee’s pre tax income. 

This is a popular tax saving strategy, which gives flexibility in choosing the car and also the vehicle can be retained with the employee and can be transferred to a new employer. Also there are benefits for the employer, it’s a cost effective plan to run these company vehicles with no risk involved. There are two types of novated lease agreements, one being `a full or split novation` and the other being `a partial novation`. Under a full car novation, employee will be taking care of the lease payments guaranteeing the value and condition of the vehicle till the lease ends. However in a split car novation, employee will be making the payments but won’t be responsible for the vehicles condition.

However the novated lease concept is UK is entirely different. Here a novated lease is transferring the ownership or the lease contract of a vehicle to another individual or a third party, with the consent of the original owner.  Though is slowly and steadily picking up in UK, but USA holds the number one position for having a market to novated leases.

Car Leasing Options in Australia

Every major financial transaction today takes place in installments. People have realized that suffering a huge financial blow at once can be divided into a time intervals of their own choosing. Whether it is a house, a car or any other expensive proposition, lease companies and banks offer a host of plans that can be made full use of. One of the most popular lease options that are popular in Australia these days are Novated Lease options on vehicles.

A Novated Lease is a lease agreement between an employer and his employee along with a lease company acting as the financer. In this type of a lease, the employee chooses a vehicle that he wants to buy and lets his employer know about it. After this, the employer, by selecting a novated leasing option buys the car for the employee. The catch is that the monthly amount for the novated lease to be paid is taken out from the income that the employee is paid by his company. Since the deductions are made on the pretax income, the interest amount is not taxable. This is the prime reason why novated car lease options have become a rage with people looking to get a new vehicle. 

Novated leases have various other advantages as well, including various psychological ones. Since the amount is deducted from the monthly salary compensation, it does not come to the hands of the employee in the first place. The whole mental pressure of making payments every month goes away. Also, it helps save a lot of money and it may mean you can afford a better car than the one you would have bought normally. There are various deals with various time periods and not just new cars, novated carleases can also be obtained on used and second-hand cars.