What Is A Novated Lease?

What Is Novated Lease?

What Is Novated Lease?

Novate Lease allows the company of the employers to lease a vehicle for their employee and take over in paying its monthly lease payments that they will take out from their employees pre-tax salary. There are two types of novated lease agreement; these are the full or split full novation and the partial novation. You might be wondering about the difference of these types of novated agreement. Well, in full or split agreement, the employer enters into a novation agreement with their employee and to the finance company, and usually the employee gets a lease with a finance company. During this novation, the employer has the right to choose if they will cover all or only some of the rights and obligations of their employee that is under to the authentic lease agreement. Under the full novation agreement, the employer is obliged to pay the monthly lease payment and they need to make sure or guarantee the residual value at the end of the lease agreement. While in the split novation, again the employer is required to pay the monthly lease payment but they are not required or forced to be responsible in the guarantee of the residual value of the vehicle at the end of the novated agreement.

Some people are saying that before purchasing a new car, we need to consider firth the novated lease, as it can help us in regards to our tax. This is a salary deduction scheme, and the employee has the right to choose the model and the color of the car that they want. And the other advantage of this unlike in the company car, the employee has the right to use it for the events outside the companys coverage like family outings and some gigs with friends.

Novated lease offers good benefits to both employers and to the employees. Like for employees, theres a possibility of considering their income tax savings, they can also save from the GST that is usually get from the operation of the vehicle, the right to choose for the car that they want and the employee can get the car and transfer the novation agreement with their new employer in case that they change their jobs, it is also possible that they will pay it on their own. For the employers side, their benefits includes: it can be a good way of increasing the wages of their employee without any additional expenses for the company, and they dont need to include it to their assets of liability.

by: Shaun McGowan

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