Novated Lease

NOVATED LEASES HELP YOUR BUSINESS MAINTAIN ITS COMPETETIVE EDGE

Looking for an edge in attracting top-quality talent to your enterprise without sending your overhead through the roof? You might consider offering your employees novated leases. Also known as salary packaging a car, a novated lease is an agreement between you, your employee, and the finance company whereby the employee leases a car and you agree to be responsible for the lease payments. You then deduct the amount of the lease payment from your employee"s pre-tax salary.

This arrangement does not affect your payroll tax or WorkCover premiums, but it allows you to increase your employee"s disposable income without giving them a pay rise. Because you deduct the amount of the lease from your employee"s pre-tax salary, he or she is taxed on his salary minus the amount of the car lease, resulting in lower taxes and increased net pay.

Under a novated lease, you also get the benefits of offering a "company car" without having to maintain a fleet. You have reduced administration costs, reduced residual value risk, and the car is off your balance sheet because it is neither an asset nor a liability to you. If your employee changes jobs, you are not stuck with a vehicle you can"t use; the car goes with the employee and so does the responsibility. Also, you get an income tax deduction on all payments made under the agreement.

With so many benefits at such minimal cost to you, why not look into offering your employees novated leases?

by: Shaun McGowan

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