Novated

Novated lease is a method of salary packaging. This lease is a 3 way arrangement between an employee, their employer and the financier. A Deed of Novation is put in place where the obligations of the finance lease are transferred from the employee to the employer. The employer takes on the responsibility for making the lease payments to the financier by way of salary sacrifice by the employee. The Deed of Novation will stay in place until the end of the lease or until the employee ceases employment with the employer.

Options:

The novated lease may also be fully maintained where all the operation costs of the vehicle are covered by a single monthly lease payment for the term of the contract, made by the lessee to the leasing company. The leasing company will take care of all the maintenance and administration costs, such as the lease rental, servicing and maintenance, registration, tyres and insurance.

Tax Claims:

The financier can claim an Input Tax Credit for the GST included in the purchase price of the vehicle and the employer is entitled to claim an Input Tax Credit for GST component of the monthly lease payments and other running costs of the vehicle. At the end of the lease or at early termination of the lease the employee is responsible for paying the GST on the residual of the lease. This is due to the Novation reverting to the employee. Fringe benefits tax is also payable by the employee and may be deducted from the employee’s pre-tax salary, so their PAYG is calculated on a reduced salary.

(Refer to your tax accountant for all confirmation of current tax claims available).