Novated Leasing program provides a range of tangible advantages for both Companies (Employers) and its employees:(i) Advantages to Employers:
- Provides employees with a remuneration benefit that is cost neutral to employer. The cost of managing the program is paid from the employees’ pre-tax income.
- Eases the transition of new employees with an existing Novated Lease into the business.
- Lease rentals are tax deductible.
- The employees are responsible for ongoing lease commitments if they leave their employment.
- Eliminates company car issues (where supplied) if the employee decides to leave.
- Maintains an employer’s competitive position in the employment market.
(ii) Advantages to Employees:
- Access to fleet discounts. SME fleet leasing arrangements have been negotiated to enable competitive discount pricing for vehicle purchasing, maintenance and tyres with their suppliers throughout Australia. Each of our customers, whether a major fleet or an individual with a Novated Lease, enjoy the same level of savings.
- The employee who elects to salary package a motor vehicle does so at the pre GST purchase price. Under a Novated Lease the financier pays for the vehicle at the GST inclusive price and subsequently claims the GST back as an Input Tax Credit (ITC).
- GST free operating expenses. Employer is able to claim the GST on an employee’s lease and operating expenses as an ITC. Employers may wish to return the GST to the employee’s salary package or via the employee’s payroll after deducting PAYG.
The concessional FBT treatment of a car combined with the GST free status of a Novated Lease will provide the majority of employees with a better net income position against financing and operating the car entirely from post-tax income. The extent of the benefit will vary depending on the distance travelled but applies across all statutory rates.
Changes were made to Novated Leasing in the 2011 Federal Budget. This resulted in all new Novated Leasing vehicle contracts entered into being subject to new regulations, by applying an updated set of transactional statutory rates that have been gradually phased in.
In essence the new rules have been of additional benefit to employees who did not salary package a motor vehicle and travelled less than 15000km per year. The average Australian motor vehicle travels only 15000km per year. These changes have created a significant benefit for those employees who have not previously been able to take advantage of the salary packaging savings on their motor vehicle(s) due to distance restrictions.