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Novated Lease – A Requirement For Every Entrepreneur

Todays Date: December 11, 2018

Over the years, leasing or borrowing cars for business linked activities has turn out to be a fairly extensive practice, across the world. Whether you take the case of an outsized firm or a hotel series, car leasing for business functions is pretty widespread. Companies also have a preference for leasing cars, as it is a lot more commercial alternative that allows them to rent a car for a predetermined time at a less significant amount of money. Simply put, would you favor to splurge thousands of dollars on a single car, when you have business requirements that wants you to maintain a fleet handy? The lease selection is unquestionably a definite success over “be the owner of your fleet” choice.

In modern times, a variety of options have achieved recognition amongst companies looking at leasing a vehicle. Of these, novated lease is conceivably the most favored preference.


What is a novated lease?


The configuration of a novated lease in Australia absorbs the efforts of an employer to secure a car lease, in favor of an employee. Through this kind of a deal, the employer handles all the aspects of setting up the lease contract with a vehicle supplier. In return, the employee presumes all the responsibilities related with the lease, together with being accountable for making the monthly lease expenditure. It is not odd for the payments to be dealt through a payroll deduction, making it feasible for the employer to accumulate and forward the payments to the lease supplier in a well-timed manner. The agreement remains in place, for as long as the employee remains with the company, or else until the lease conclusion, whichever appears first.

Usually, the employer who organizes the novated lease for an employee takes away the cost of the monthly repayments from the gross earnings for the period, rather than from the net pay. This indicates the sum is extracted before taxes are determined. Recognized as salary packaging a vehicle, this approach does offer a few tax benefits on the front-end at the same time as offering the employee with added fringe benefits.

Advantages of a Novated Lease

*In favor of Employees:

Option – you can select a car that best go with your requirements.

Control – you manage the car, consisting of, care and repairs.

Transferability – you can take the motor vehicle and lease with you if you change jobs.

Tax efficiency – repayments are made out of pre-tax wages.

*In favor of Employers:

No outstanding risk.

No surplus vehicles if an employee leaves.

Employer can offer a more smart salary package, and consequently magnetize the employees they wish for.

Reduced management time and expenses (measured up to company cars).

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