A novated lease is best explained as a form of finance that has a three-way agreement between an employer, employee, and a novated lease provider.
It allows an employee to finance a vehicle as part of their salary - known as salary packaging - and benefits both the employee and employer, even where the vehicle is entirely for personal use.
Your employer will make the monthly lease payments to the finance company, and you can use the vehicle as part of a salary packaging arrangement. With that agreement, most of the lease, running costs of the vehicle and fringe benefits tax (FBT) are deducted from your pre-tax salary.
Your income tax is then calculated on your reduced salary, which can increase your net disposable income.
Without salary packaging
With salary packaging
Criteria for Novated Lease
- You are Employed on a full-time or permanent part-time basis
- You are working for an employer who supports a novated leasing agreement
- You have the ability to meet the repayments for the duration of the lease
- You are 21 years of age or older.
Ready to find out more?
Contact Western Financial Group today to ensure you get it right – the first time!