Novated Leases: Overview
Novated leasing allows employees to access vehicles of their choice via a salary packaging arrangement, providing benefits to both the employee and the employer.
Novated Leasing is a tri-party agreement between, PAR Leasing, an employer, and their employee.
The employee leases the vehicle directly from PAR Leasing, and the employer agrees to make payments for the lease to PAR Leasing for the duration of the contract, or while the employee is under their employment. The employer makes these payments using the funds deducted from the employee's salary under the salary packaging arrangement.
Novated Leasing can benefit an employee of any industry. The benefits include Corporates, Public Benefit Institutions, and Charities. The benefits vary depending on the following factors:
- Type of car selected
- Distance travelled
PAR Leasing can provide information and quotations to employees of any organisation outlining how leasing works and the possible benefit to the employee, but PAR Leasing is not a financial advisor. We strongly recommend that employees seek independent financial advice before entering into any lease/financial contract.
Employee Benefits of Novated Leasing
Access to discounts - Your employees get access to our buying power and discounts:
- Discounts on vehicle purchase
- Access to fleet pricing on servicing, repairs, and tyres
GST Savings - Your employees will have the advantage of not paying GST on the purchase of the vehicle, or on the running costs included in their lease, e.g., Fuel, Maintenance, Tyres, and Insurance.
Tax Advantage - Novated leasing allows employees to make payments for the vehicle from their pre-tax salaries, which means the employee will have more comparable salaries.
Choice of Vehicle – Employees can choose from any passenger vehicle available in Australia and can add the options and accessories that they want on their car.
Convenience - Monthly set budgets assist the employee with budgeting and having access to a car with no hassle of planning for future costs and ensuring prompt payments;. We look after all of that for you.
Potential Profit - The employee may be able to make a tax free profit on the disposal of the vehicle at the end of the lease
Employer Benefits of Novated Leasing
No cost to Employer - The provision of this benefit to your employees is at no cost to your business, There are no fees or charges that are payable by you the employer.
Employee Satisfaction - By providing your employees with access to novated leasing you can improve your employee satisfaction index and use it to attract quality employees into your business.
Low Administration - PAR Leasing takes on the majority of the administration associated with the provision of the benefit and all employee queries. We have the information and the experts available to support you and your employees.
Tax Deductions - The monthly rental payable to PAR Leasing becomes a tax-deductible expense for your business while you are taking on the obligations to pay the lease on behalf of your employee (while he is under your employment).
Not your Asset/Liability - The vehicle is the employee's responsibility. At no time does it become your asset/liability. If an employee decides to leave your employment or decides that he no longer wishes to keep the vehicle, or the term ends, its disposal or the discharging of the financial obligation is with the employee.
PAR Leasing can provide arrange of lease types and structures to suit individual requirements. With the most common being a Fully Maintained Novated Finance Lease.
This monthly rental would include the following items:
Finance - Finance for the purchase of the vehicle, under this lease there will be a residual value amount due at the end of the lease term, this is set in line with ATO guidelines and is the responsibility of the employee.
Fuel - The budget for this depends on the expected travelling distance of the vehicle during the lease term. A fuel card will be provided to the employee which will allow them to fill up at selected service stations and receive a discount on the fuel that they use. All charges will go back to PAR Leasing. Any costs incurred that exceed budget will be payable by the employee.
Maintenance - Any scheduled servicing will be budgeted for and will be charged back to PAR Leasing. Any costs that fall outside of scheduled maintenance and do not form part of the warranty on the vehicle will be at the expense of the employee.
Tyres - Tyres will be budgeted for within the lease based on the distance expected to be travelled. Any costs that fall outside of this estimated amount will be at the expense of the employee. Fees are charged back to PAR Leasing.
Registration - The finance amount includes initial registration. The monthly rental includes any registration renewals due during the term of the lease. PAR Leasing take care of the renewal for you during the lease term.
Roadside Assistance - this will be budgeted for where it is nor provided by the manufacturer.
Insurance - This is an optional inclusion in the package. IF the employee chooses for PAR Leasing to provide the insurance, it will form part of the monthly rental and all renewals during the lease term will be taken care of by PAR Leasing.
If employees choose to arrange their insurance, it will be excluded from the monthly rental and will be at the employee's expense. They must then pay for all Insurance charges and provide proof of Insurance to PAR Leasing.
The services provided are budgets, and where costs exceed budget, the employee will have expenses passed onto them either during the lease or at the end of the lease term.
If conditions change during the lease term, the lease can be modified to take into account the increase or decrease in expected budgets.
Fringe Benefits Tax
Fringe Benefits Tax (FBT) applies to all novated lease vehicles. The application is the same flat rate for all cars, regardless of term and distance travelled.
To assist in reducing and eliminating FBT PAR Leasing recommends using the Employee Contribution Method (ECM) and will provide quotations to you using this method.
Under the Employee Contribution Method, a portion of the rental cost for the lease is deducted from the employee's salary as a contribution from post-tax pay, in doing this it will reduce and eliminate the FBT payable, will improve the effectiveness of the salary packaging arrangement.
It will also lower the overall cost of packaging, and improve the employees take home salary.
Luxury Car Tax
Luxury Car Tax (LCT) is a 33% levy on any luxury car as defined under the Income Tax Assessment Act 1997. The ATO decides this value and reviews it every year.
The limit on this levy is higher for 'green' vehicles (those with a fuel consumption of or less than 7L/100km).
Entering into a novated lease on any vehicle that is deemed to be a luxury vehicle under this assessment will incur additional costs to the employee's package. PAR Leasing will advise of these charge- at the time of providing the quotation to the employee.
At Lease End
PAR Leasing will provide the employee with the end of lease options before the end of the lease, these will vary dependent on the type of contract that the employee has chosen, but may include the following:
Extend the lease term - the employee may want to retain the current lease vehicle for a further term. PAR Leasing will provide the employee with an Extension Quotation. Please note that there are limits to the maximum term available.
Enter into a new lease - the employee may want to start a new contract, PAR Leasing will provide the employee with quotations for a new lease vehicle of their choice.
Purchase the current lease vehicle - The employee can choose to purchase the car, PAR Leasing will provide the cost and details to the employee.
Sell the Vehicle - Under a finance lease arrangement, the employee can choose to sell the vehicle and has the potential to make a tax free profit on the sale.
PAR Leasing can provide a variety of alternatives on your Novated Lease,
Please Contact Us to find out more.