Novated leasing has been around for over 30 years in Australia, so it’s not a new thing by any stretch of the imagination. Make no mistake, Novated Leasing is still a great way to save some dollars and manage your car through your salary using pre-tax dollars. But there are some misconceptions out there about eligibility to a novated scheme and what the actual benefits are, so let’s take a closer look.
Myth 1 - It’s complicated
It is important to realise from the outset that a novated lease is not a complicated product. In short it is an ATO-approved way to package your car and associated expenses through your salary using pre-tax dollars. It is a three-way agreement between a finance company, your employer and yourself. The finance company, such as Express Fund, manages all the all the setup, in-lease management and communication. This includes FBT management, employee management, reconciliations and reporting. All the employer needs to do is deduct the amounts required and pay an invoice once a month.
Myth 2 - Novated leases are only available to staff working in large companies
There is a common misconception that novated leasing, or salary packaging a vehicle as part of an employee’s salary, is a big-company benefit. But it is available to any business in Australia that wants to allow staff to use it. It is true that most companies currently operating novated lease programs are larger, usually over 100 employees. Traditionally, small businesses have avoided offering novated leasing to their employees because of the perceived complications in setting up and managing a program. However, smaller companies can access a novated lease even for just one employee.
Myth 3 - I don’t earn enough
Most novated leases in Australia are used by everyday people, nurses, accountants, bankers, tradespeople, police, government employees etc. In fact it is geared to really help the average employee in Australia.
All you need is to find the car you want, and a well-run budget to support the ongoing expense of running that car. We also advise that an individual seeks independent financial advice before proceeding.
Myth 4 - It's only for people that drive for work
The majority of novated leases are set-up using a statutory Fringe Benefit Tax calculation. This means there are no requirements for any business-use kilometers. You can even package a car for someone else such as your partner through your salary.
Myth 5 - I lose my benefit if I change jobs
If you leave your job,, the car and the lease can go with you. The company simply stops making the monthly payment and your novated lease transfers to your new place of employment. Your company is not tied into a car finance lease that’s not required anymore.
So in summary, novated leasing is available to any business in Australia that wants to allow staff to use it. And yes, there is a real intrinsic value in novated leases, but it is important to seek expert advice and ask the following questions:
- How much is the car on-road?
- What is the comparison rate on the loan?
- What is the amount financed?
- Request an outline of all fees including; fuel card fees, management fees, maintenance fees, sourcing fees.
- What extras are included in my quote? If yes, please outline the cost per item, if it's financed and what it is.
If your interested in novated leasing for yourself or are interested in setting up a Novated Lease program for your business, contact us here.