Overlook A Novated Lease

Why You Shouldn’t Overlook A Novated Lease

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A novated lease may seem like another buzz word that seems boring, but you should know that it can really save you money. Car leases are typically between the buyer and seller, but adding your employer to that lease can make it a better deal. This adds a whole new dynamic to purchasing a car that you may not have known about.

What Really Is A Novated Lease?

It may seem like a seedy deal to pay for something that you fully own, but it is common practice and totally legitimate. The Australian government only sees a novated lease as adding a new party (your employer) to your lease agreement. This will result in your employer paying for your lease and they will take it out of your check prior to taxes being paid.

You will typically see a Novated Lease at Stratton last between two to five years. Once the lease is up, you can trade it in for another leased car. You may also pay a lump sum to keep it for yourself. It is probably more desirable to get the new car, but you have the right to buy the older one if you are really in love with it.

The Tax Benefit Of A Novated Lease

The main reason why most people go for novated leases is that it can lower your income taxes. As mentioned before, the money will be taken out of your pre-tax pay and your paycheck will be smaller. When filing your taxes, the money that your receive in your check is what counts overall. Since you wanted to buy or lease a car anyway, you are essentially getting a huge indirect discount through a tax loophole.

Isn’t A Novated Lease The Same As Renting?

Renting an over-abused car from the airport really is not like a novated lease. A novated lease is an agreement between an employee, employer and the dealer. The employer will be responsible for making payments and the employee is responsible for taking care of the car. The expenses of the car will also be taken out of the employee’s pay, and will essentially add to the bundled savings of this scheme.

The government is indeed aware of this scheme, which is why they have a Fringe Benefits Tax. Fortunately, this tax is very mild and you will still end up with huge savings. The annual FBT in the instance of a novated lease will be 20% of the car’s value. The amount of savings will also apply to just about any tax bracket.

The Risk Of A Novated Lease

This type of lease does still have its share of risks. If you lose your job, you will no longer have somebody to pay the lease and your car will disappear with your job. If your current employer does not decide to accept your novated lease idea, you are left handing unless you find another stable employer. Keep your job security and the relationship with your employer in consideration before taking on this sort of lease plan.

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