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This may seem like a relatively new idea when it comes to availing motor vehicles. Basically, what it means is that you strike an agreement between your employer, a certain financial institution or company and yourself, that joins the entire thing together and calculates all the costs for your desired car. This way, you can pay for it with the help of pre-tax dollars. Your employer will offer a novated leasing as part of your salary package, and you can then choose a particular car within that budget. We can all agree that a car is not just a mode of luxury any longer, but in the busy streets, it is a necessity. You can also use your car as a revenue resource for you. A novated lease is effective, especially if you avail the car through a company fleet. You can buy the car without any restriction, whether it is a new sedan or a second-hand 4WD.

Advantages of a novated lease

There are many perks of a novated lease. As an employee, you can expect to get these benefits when you are opting for one.

Surely, by now you can guess how much cost-effective and tax-effective a novated lease can be. Since they are salary packaged, you can have them prepaid from your tax-income. When you pay for the vehicle with your pre-tax dollars, you can get them at a relatively lower rate of tax. If you paid for the running costs of the vehicle with your tax income, however, it would have cost you a lot more.

You get to choose the car you want. This is one of the major perks of a novated lease since it is not a part of the company fleet.

You can be sure of the fact that the vehicle is at your service 100% of the time. You get no restrictions on who gets to drive it.

The lease and your car are portable, which means that if you quit or change your job, you don't need to hand it over. You just need to enter another party with the help of another Novation agreement. That is the benefit of a novated lease. It allows you to find a different employer and financier, but you get to keep the car.

Lease repayments come with a fixed schedule for the period of the lease term. You can choose a flexible term period from 12 to 60 months. Not to mention the numerous tax benefits you get when you from the novated lease. For example, you get the benefit of input Tax Credit or ITC and other relative benefits. You can get a clearer picture when you discuss this with your accountant.

Conclusion

After you have bought the car on a lease, your employer and the respective financial institution will have to sign on the novation agreement. According to the agreement, your employer will take the responsibility of repayment to the finance company. They will be held liable for the agreed expense of the automobile of your choice, and it will be included as a part of your salary package agreement. You need to agree to the "salary sacrifice" to set a portion of your income aside for the benefit of a car. However, novated lease guarantees you a lower interest on the running costs of the car and Fringe Benefits Tax or FBT. These will be deducted from your pre-tax income.