In today’s competitive job market, it can be difficult for companies of all sizes and in all industries to be able to attract and retain top talent. While there are a number of attractive benefits that employers can include in a company’s workplace benefits packages, one of the most coveted benefits to include is a company car on a novated lease.
What Is A Novated Lease?
This form of leasing a vehicle is a three-way agreement which involves the employer, the employee, and a finance company. The finance company will purchase the vehicle on your behalf, and the employee then pays the finance company an agreed amount every month (typically on a bi-monthly basis) for the next 1 to 5 years (however long the length of the lease is).
Each time an employee makes a payment towards the lease, they’re reducing the balance owed on the car. Once the lease term is over, employees then have three options:
- To purchase the car for its residual value (i.e. a percentage of the price for which the vehicle was initially financed)
- To refinance the vehicle
- To sell it
Benefits Both The Employer And Employee
A novated lease is a win-win situation for both the employer and the employee. Let’s first look at the benefits that an employee will enjoy:
- All leases are paid with pre-tax dollars (which means employees will have a higher take home pay)
- Flexible leasing terms (employers and employees can upgrade to a different car whenever the need arises)
- Multiple vehicles can be leased at once
- No deposit required
- Unrestricted use
- The option to include the vehicle running costs (fuel, repairs, insurance, registration, etc.) as part of the lease payment
For many employees, this is the ideal form of financing a vehicle for them and their family. But it’s also an ideal for the employer for a number of reasons, starting with:
- Leased vehicles are not a liability or an asset
- Employers who are registered for GST can claim an input tax credit on any GST paid on the lease
- Lease rental payments or any payments that have been made under the lease agreement are an income tax deduction
- Minimised risk for the employer (i.e. if the employee chooses to leave your organisation, he or she is then responsible for the vehicle)
Would you like to know how novated leases can work for you? Contact us, without obligation, on 1300 664 323.