How Do Novated Leases Work?

Novated leases have become increasingly popular over the last few years, offering advantages to both employers and employees. Fleet Network explains how novated leases work and the benefits to both employees and their employers.

What is a Novated Lease?

A novated lease is a three-way agreement for a new car between you, your employer and a finance provider/leasing company such as Fleet Network. Your employer will pay the lease payments, registration, fuel, insurance and maintenance costs of the vehicle directly from your pre-tax salary. This will result in tax savings for you, as your own taxable income will be lower.


How Novated Leases Work

Employee Benefits of a Novated Lease

Novated leases provide:

  • A significant tax saving
  • All the car running costs are included in your regular repayments, makes budgeting easy
  • Freedom to select the car you want – used or new
  • You don’t pay GST on the purchase price or the running costs
  • There’s no limit on the KMs you can drive, all you have to do is estimate how many KMs you may do per annum so Fleet Network can calculate fuel allowances
  • Unconditional use of your car for both personal and business purposes, and
  • The choice to pay the residual and own the car outright at the end of the lease term.

If you leave your current job before paying off the lease agreement, you have the option of transferring the lease to your new employer, or you could arrange the lease payments yourself.

Employer Benefits of a Novated Lease

There are many benefits when offering novated leasing to your employees:

  • There are no administration costs or fees to the employer when creating the program
  • Simple to administer as Fleet Network has dedicated software to manage the program from end to end – including FBT reporting
  • You become an employer of choice as you are providing a financial benefit to employees. ie tax savings and cost savings on their car
  • Save on recruitment costs as you are attracting good candidates and retaining them
  • Save on training costs through increased retention
  • A novated lease takes away the burden and costs of managing a fleet of company provided motor vehicles
  • It takes away the requirement of documenting a company vehicle as an asset or obligation to the business

Novated Leases and Fringe Benefits Tax – FBT is a Federal Government tax imposed to certain fringe benefits paid to workers by their company and is paid by the company.

Should I arrange a Novated Lease?

Speak to a Novated Lease expert from Fleet Network to find out how you can purchase your new or used car through a novated lease. Our consultants will explain how your lease arrangement will work, how to set it up with your employer and how much tax you could save.