The First Timer’s Guide to Novated Leasing for Private Employees and Employers
Understanding car leasing can feel a bit overwhelming and complicated, especially with the number of options available, the jargon used and navigating the information. If you’re an employee or employer, and you’re new to novated leasing, you may be wondering where to start and how it works. Novated Choice has put together a first-timer’s guide to novated leasing that will tell you everything you need to know. You’ll be an expert after reading our guide!
We’ll walk you through the essentials (how it works and the benefits). We understand that feeling confident with what a novated lease will help you make a choice that’s right for you. So, we’ve provided you with clear and simple information that helps you break it down. Whether you’re seeking a new experience when you get behind the wheel or smart workplace perks, we’ll lay it out clearly for you. Novated leasing can be a game-changer for your lifestyle and work.
What’s Inside:
- Australia: The Home of Novated Lease Expertise
- Novated Leasing for Private Employees and Employers
- The First Timer’s Guide to Novated Leasing
- Let’s Make Novated Leasing Work for You
Australia: The Home of Novated Lease Expertise
When it comes to novated leasing, Australians are truly leading the way. The country has become a hub for novated lease expertise, and it is no surprise why. Australians have embraced this flexible leasing option, making it one of the most popular ways to drive brand-new cars, including electric vehicles (EVs).
In fact, novated leasing is playing an important role in the rise of EVs in Australia. According to the latest data from the National Automotive Leasing and Salary Packaging Association (NALSPA), EVs made up 35-40% of all new novated leases in the first few months of this year. This impressive uptake is a clear indication that Australians know how to make the most of novated leasing.
Source: driven.io
Novated Leasing for Private Employees and Employers
Novated leasing is a car finance arrangement involving three parties: the employee, the employer, and the finance provider. Let’s explore how novated leasing benefits both employers and employees, making it a smart choice for your business and lifestyle:
Benefits for Employees
Tax Savings
One of the standout benefits of novated leasing is the potential tax savings. Because lease payments are deducted from your pre-tax salary, you can reduce your taxable income, meaning you may pay less tax.
Reduced Running Costs
A novated lease typically covers more than just the car's purchase price. Knowing exactly what your vehicle expenses will be each month can simplify budgeting and help you avoid unexpected costs.
Flexibility in Vehicle Choice
You can choose the car that suits your needs and lifestyle. When the lease term ends, you can lease another vehicle, continue leasing the same car, buy the car, or walk away without further obligation.
Potential for Lower Interest Rates
Since novated leases are tied to employment, they often come with lower interest rates than personal car loans. This can help you save on the overall cost of the car.
Simplified Payments
With your employer handling the lease repayments through salary sacrifice, you don’t have to worry about separate payments. It’s all taken care of before you even see your income, making it a seamless and convenient process.
Benefits for Employers
Attract and Retain Talent
Offering the novated lease for electric vehicles can be a great employee perk. It’s a highly desirable benefit to make your organisation stand out to potential hires.
Simplified Payroll
With a novated lease, the vehicle and lease payments are handled as part of salary sacrifice. This can streamline payroll processes and reduce administrative burdens.
No Asset Risk
Unlike providing a company car, where your business is responsible for the vehicle’s depreciation, with novated leasing, the employee takes on the asset risk.
Reduced Payroll Tax
Salary sacrifice arrangements, like novated leasing, may reduce your payroll tax liability, depending on the structure of the salary packaging and the state of operation.
Enhanced Employee Satisfaction
A structured program allows employees to enjoy significant financial benefits without additional cost to you.
The First Timer’s Guide to Novated Leasing
Ready to dive into novated leasing? Here are the steps you need to follow, even if you are an employee looking to lease a vehicle or an employer facilitating the process:
Guide to Novated Leasing: For Employees
1. Assess eligibility
Confirm that your employer offers novated leasing as part of their benefits package. Ensure you meet any specific eligibility criteria set by your employer or the leasing company.
2. Determine affordability
Evaluate your financial situation to ensure you can afford the lease payments along with other associated costs like insurance, maintenance, and fuel. Use a novated lease calculator to estimate potential savings.
3. Choose your vehicle
Once your employer has confirmed the novated lease is an option, it’s time to select a vehicle. The vehicle you choose must meet the finance provider’s requirements, so it’s best to do this through the employer's approved supplier or leasing company.
4. Get a quote
Novated Choice will provide a quote that includes details such as the term of the lease, the monthly payment, running costs, and overall savings. You can decide whether you want to include these running costs in your lease or pay them separately.
5. Complete the paperwork
After you’ve chosen your vehicle and finalised the costs, the next step is to sign the novated lease agreement. This includes agreeing to a salary sacrifice arrangement where a portion of your salary will go towards making the lease payments.
6. Enjoy the benefits
As you drive your new vehicle, you will enjoy the financial perks of having the lease payments deducted from your salary before tax, reducing your taxable income, and potentially lowering your overall tax bill.
Guide to Novated Leasing: For Employers
1. Determine your company's policy
If you are considering offering novated leasing as a benefit, first establish clear policies and procedures. FBT exemption will not impact the employer, however, full FBT on non-electric vehicles potentially can.
2. Partner with Novated Choice
Novated Choice can help structure the lease, manage paperwork, and ensure compliance with relevant tax laws.
3. Outline the financial responsibilities
As the employer, you will need to manage the salary packaging arrangement. Your leasing provider will provide clear instructions on how to set up an employee deductions correctly, ensuring there is no FBT liability outstanding
4. Provide the lease details to your employees
Once the logistics are sorted, communicate the benefits and options to your employees. Explain how the novated lease works, the benefits of salary sacrificing, and what they need to do to set up their lease.
5. Coordinate payroll deductions
After an employee has chosen their vehicle and signed the agreement, you will need to adjust their payroll deductions.
6. Review and monitor the lease arrangement
It is important to regularly review the novated lease arrangements to ensure everything is being handled correctly. This includes confirming that deductions are accurate and ensuring no FBT implications arise.
Let’s Make Novated Leasing Work for You
If you’re wondering how novated leasing will work for you, we can help you get started. We’re the experts, and we can streamline the process for you, so you understand the details.
At Novated Choice, we’re ready to provide you with tailored advice, help you understand your options and guide you through each stage of the leasing process. For more information or to get started, contact our team today, and we’ll have you driving a new car in no time!
FAQ’s
What happens if I change jobs when I have a novated lease?
This is more common than you think! If you have a novated lease agreement with your employer and you get a new job, you have options. You can choose to transfer your lease to your new employer if they agree to it. Or, you can make a payment to purchase the car and own it. If neither of these works for you, you can also refinance it, so you can keep driving your car without hassle.
Are there hidden fees?
At Novated Choice, we’re committed to transparency. When we present you with a final quote, you can trust that we have included everything and there’ll be no surprises along the way. We keep it honest and simple, so you know exactly what you’re getting when you choose Novated Choice for your novated lease.
Will my vehicle be solely for business use?
No! That’s one of the many great things about your novated lease. Although it is an agreement with your employer, your car is entirely yours to use for business, pleasure or leisure. This includes weekends, holidays and everything in between. It is yours 100%.
What income or salary do I need for a novated lease?
There is no definite answer. The truth is, if you’re an employee with a salary and your employer offers a novated lease agreement, you can find a deal that works for you and your income. There are beneficial tax savings across a range of income levels or salary brackets. Find out more about how it would work for you here.
What are my options at the end of the lease?
The good news is you have options, and Novated Choice is flexible! At the end of your lease term, you can choose what works best for you. Generally, you will have three options:
Upgrade your car: Pay the difference and trade your car for a brand new one, with a new lease.
Keep your car: Pay the remaining amount and officially own your car independently.
Refinance: You can extend your lease term by refinancing your car with the residual value.
How do I get my employer to offer novated leasing?
If your employer doesn’t currently offer novated leasing, that’s fine! We make it easy to get started. Our team can reach out directly to explain how it works, and we’ll get them set up quickly!
