If you are on an income between $80k and $180k, a novated lease is a great way to increase your buying power. It is a car incentive that offers tax benefits to both you and your employer.

It can be hassle-free as your employer pays the lease payments from pre-tax dollars, and your taxable income is reduced accordingly. It can also include running costs, like fuel, servicing and insurance, in a single payment, which some employees prefer. For more information about the novated lease vs salary sacrifice, click here.

Tax Savings

A novated lease is a three-way arrangement between you, your employer and a financier for the car you want to buy. It involves your employer making the lease repayments from pre-tax income, which reduces your tax liability. It also allows you to bundle on-road costs and car finance into one payment (as long as the vehicle is below a luxury threshold) and to save GST on the vehicle cost and lease payments.

It is a massive benefit for anyone earning above the top marginal tax rate and can add up to thousands of dollars over the life of a lease. And that’s before even mentioning the fleet discounts and interest rates that novated lease providers can often negotiate. It’s the ultimate car incentive.

Flexibility

When you choose a novated lease, the payment comes from your pre-tax salary, reducing your taxable income – often by thousands each year. It is a massive benefit for people in higher tax brackets. Additionally, you don’t have to worry about a balloon payment at the end of the lease or paying for the car registration and maintenance fees.

Employers interested in offering a salary sacrifice car as an incentive should know they won’t have to incur significant administrative burdens if they partner with the right novated leasing provider. A reputable fleet company like Easifleet oversees the entire process for employers and employees.

Ownership

A novated lease allows you to enjoy the benefits of owning your car without paying for it upfront. You will ‘own’ the vehicle and its debt through a three-way arrangement between you, your employer and a leasing company (e.g. Tusker). If you leave your job or lose your employment, the car will remain your responsibility, not your employer’s.

Your salary packaging provider will take your pre-tax earnings to pay for your car and its running costs. Because this is done before tax is applied, you can save money on your income tax throughout the year and increase your disposable income.

Each month’s bundled payment from your payroll covers the car and its running costs, including finance, insurance, fuel, servicing, registration, tyres and more. You can choose to have your novated lease fully maintained or non-maintained, which will vary the amount of money you have to pay each pay cycle.

Insurance

Car salary sacrifice can be an excellent employee benefit, allowing employees to gain access to a new vehicle at a much lower cost than traditional leasing options. However, seeking appropriate advice is essential before deciding on salary sacrifice for a car.

A novated lease is an agreement between an employer, an employee and a specialist novated leasing company like Fleetcare. The arrangement allows employees to pay for a new or used car and associated running costs from their pre-tax income. It includes GST savings on the vehicle purchase price, fuel, servicing and tyres. For more information about the novated lease vs salary sacrifice, click here.

It also means they can avoid paying capital gains tax on future vehicle sales. Moreover, they can claim a deduction for personal income tax on any finance and running expenses paid. However, some employers are concerned about the administrative burden of managing this type of arrangement. The new lease provider handles all the paperwork and payments for the employee and the employer.

Salary sacrifice is a way for you to forgo some of your salary in exchange for your employer providing certain items or benefits. These items may be either tax-free, concessionally taxed or superannuation-related. You can salary sacrifice up to 100% of your gross income for these items.