Novated Lease (Salary Packaging)

A Novated Lease is the most common way of salary packaging a vehicle. An employee leases a vehicle and their employer pays the monthly lease rentals from the employee’s pre-tax income. .

How does a Novated Lease work?

A Novated Lease is a three-way agreement between an employer, employee and finance company, whereby the employee enters into a lease agreement with the financier and the employer agrees to take on the employee’s obligations under the lease. Under this arrangement, the employer pays the monthly lease rentals on behalf of the employee, and provides the vehicle for the employee to use as part of their salary packaging arrangement. If employment ceases for any reason, or the lease agreement is finalised, the Novation ceases and the obligations assumed by the employer revert back to the employee. .

Benefits of a Novated Lease

For Employees:

• Choose the car that best suits your needs
• You can take the vehicle and lease with you if you change jobs
• Repayments are made from your pre-tax income

For Employers:

• No residual risk
• No excess vehicles if an employee leaves
• You can offer a more attractive remuneration package to potential employees
• Reduced administration time and costs (compared to company cars)
• Reduced on-costs such as Payroll Tax and WorkCover premiums

Who does a Novated Lease suit?

A Novated Lease suits an employee who wishes to include a motor vehicle as part of their salary package (assuming their employer offers salary packaging as an option).