What is a novated lease?
Novated lease, salary package, salary sacrifice… it’s all the same!
A novated lease is the smart option to consider when purchasing your next car. It is an agreement between you, your employer and a financial provider where you ‘lease’ your vehicle and your employer is responsible for making your repayments out of your pre-tax salary. It allows you to have the running costs (like fuel and services) deducted in the same repayment and some employers will even allow you to claim back the GST on those same costs. This means you receive more take-home salary compared to those who take our traditional finance options (like a bank or credit union). There is flexibility with a novated lease – you can upgrade your vehicle at any time during the contracted period or at the end you can ‘pay out’ the contract and own your vehicle.
Where do I start?
If you choose to enter a novated lease, there are a few simple steps you need to take before getting your new car.
First you need to check if you are eligible (see the next question for more information). After this, give our novated lease experts a call on 1300 738 601 and follow the prompts to have a chat about your needs. They’ll then guide you through the process until you have the keys to your new car.
What are the advantages of a Fleet Network novated lease?
There are many ways to purchase a car: dealer finance, personal loan, home loan offset or cash payment. No matter how good the deal may seem, none of these can offer the additional tax and GST savings of a novated lease.
A Fleet Network novated lease offers advantages to both the employee (the person who will be owning the car) and the employer (who will arrange the salary package).
> Repayments taken from your pre-tax income mean you save on tax and receive a greater take-home salary.
> Significant savings on the new car purchase price through national fleet pricing discounts.
> Save GST on the purchase price of the vehicle and its running costs*. (*Subject to Employer policy).
> Ultimate private use; you choose the car you want and how it’s used but get the benefits associated with a company car.
> Save time and stress when sourcing and procuring a new car.
> Gain access to dealerships Australia-wide, ensuring you get the vehicle of your choice.
> At Fleet Network, you aren’t just another number. Our representatives will work with you from beginning to end, and remain available to you after you’ve received your car.
> Work directly with professionals passionate about cars – we don’t deal in anything else.
> Access to a range of exclusive Fleet Network benefits.
> It costs nothing to you the employer, but provides thousands of dollars of benefits to your employees.
> Effectively increase employee salaries with no additional salary costs to the company.
> Raise the value of your company in the eyes of your employees.
> Reward employees’ hard work with minimal effort on the part of the company.
> Retain, Reward, Remunerate – a very effective way to attract quality new employees at no additional cost.
> No financial risk or liability to employers; if an employee leaves, then the deed of novation ceases and responsibility for the lease payments reverts to the employee.
Is it too good to be true?
Hundreds of thousands of Australians benefit from salary packaging and novated leases every year. Salary packaging is an extremely popular way to get more out of your pay.
Many employers within the private and public sector offer salary packaging as an incentive to retain and reward their staff. The types of things you can salary package, and how much, depends on what your employer offers, as well as what the Australian Taxation Office (ATO) allows for your particular industry.
Fleet Network have been offering novated leases on vehicle purchases for more than 20 years. It’s worth asking one of our experienced representatives to give you some options.
Do I drive enough kilometres to have a novated lease?
You don’t have to drive a lot to benefit from a novated lease. Whether you drive fewer than 10,000 or more than 50,000 kilometres a year, a novated lease is a great way to finance a car.
Changes to legislation mean that the amount of kilometres travelled is now less important for novated lease drivers. For example: with a novated lease on low kilometres, Kim earns $60,000 a year (excluding the employer’s super contributions) and is considering leasing a new car valued at $34,000 over four years. Kim estimates the car will travel 15,000 kilometres a year and intends on paying for the lease and running costs with a combination of pre-tax and post-tax dollars. By choosing to salary package the car, Kim’s disposable income could increase by $231 a month – or $2,772 a year.
How do I know if I’m eligible?
To be eligible for a novated lease you must:
> Be a permanent employee – you cannot be in a probationary employment period.
> Your employer must be willing to enter into the agreement via a deed of novation.
If your employer would like more information, please follow this link.
Do I have to involve my employer?
Yes you do. Your employer is responsible for deducting your repayments from your pre and post-tax salary. This is why it is generally called a ‘salary sacrifice’.
To save tax, do I need to use my car for business?
No, not at all. Even though your employer is helping you to buy the car, it belongs to you as a private purchase.
What documents will I need?
To enter into a Fleet Network novated lease, you will need to supply the following:
> A valid Australian driver’s license
> Current pay slips.
> Completed settlement documents, which Fleet Network will supply you with.
Can I buy a used car?
Yes. You do not have to purchase a brand new car in order to enjoy the advantages offered by a novated lease agreement.
However, because a car is a depreciating asset we can only offer a novated lease agreement for used vehicles no more than five years old. This is to protect you and ensure that your car still holds value when it reaches the end of the lease agreement period.
How can I work out what my savings will be?
The best way to get an accurate savings calculation is to call one of our experienced representatives on 1300 738 601.
What can I do if the quote is higher than I expected?
If you receive a quote which is more than you initially thought, we encourage you to contact our team. We will work with you to prepare further quotes.
Can I choose the insurance company? I might be able to get a better deal elsewhere.
Yes you can choose the insurance company and Fleet Network actually recommends this. If you decide to source your insurance from your own provider we will allow for this in your quote so that you can pay for the insurance yourself and then submit a reimbursement through your online account.
Can I set my residual lower than recommended?
This may be possible; however the Australia Taxation Office prescribes minimum and maximum amounts that the residual can be set at. These minimum and maximum amounts depend on the original purchase price of the vehicle so please see the table below on residual percentages.
Depending on the kilometres you travel per annum, in some cases travelling more than 30,000 kms per annum the residual can be set lower as agreed by the financier.
In order to minimise the chances of having to make up a shortfall, it may be beneficial to set the vehicle residual lower than the expected value at the end of the lease, rather than higher.
Residual amounts table:
(% of vehicle value)
(% of vehicle value)
What happens if I lose my job?
We can transfer your novated lease to a finance loan with the financier. Your novated lease is fully portable; if you are moving to another organisation/department which allows salary sacrifice, the lease can be fully transferred via a ‘renovation’.
What happens at the end of the lease?
Fleet Network will contact you to discuss the upcoming conclusion of your lease. You have several options when it comes to your vehicle:
> Get Fleet Network to arrange an immediate changeover to a new car.
> Refinance the residual with Fleet Network and continue leasing provided the car is no more than eight years old.
> Pay out the residual, keep the car and cease leasing.
> Pay out the residual, sell the car yourself and cease leasing.
What is FBT?
Fringe Benefit Tax (FBT) is a tax that is paid on certain benefits that employers can provide their employees. A novated lease is a type of FBT. FBT is separate to income tax and is based on the taxable value of the benefit you have been provided with.
How does FBT work?
Fringe Benefit Tax is a tax which is based upon the value of the benefit you receive for your private use, in this case, a novated lease vehicle. The calculation of liability is made from the cost of the vehicle and the annual kilometres.
Once I’ve entered a novated lease, can I choose where the car is serviced?
Yes, as long as the service agent is a certified mechanic.
Can my family drive the car?
Yes they may, however you will remain responsible for how the vehicle is driven and cared for. Fleet Network recommend you include additional drivers on the comprehensive insurance policy included in the lease.
I have some expenses that I paid for. Can these be paid back to me?
Yes, provided they are legitimate vehicle operating expenses and you have a valid tax invoice. Provide these and the bureau that manages your package will reimburse you the expenses paid.
What happens if I don’t spend my entire budget?
If your account is in credit, Fleet Network will reimburse the full amount of the credit to your employer who will then pass this on to you through the normal payroll system. If you decide to enter into a new novated lease, it is possible for this credit to be rolled over to your replacement vehicle costs.