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Novated Lease Explained

A novated lease is one of the most cost effective ways of purchasing and running a new car. That’s because the lease repayments and vehicle running costs can be included as part of your salary package and paid for using pre-tax salary. Using pre-tax salary to pay for your vehicle expenses reduces your taxable income and ultimately means that you pay less tax every year!

Vehicles salary packaged under a novated lease arrangement typically attract Fringe Benefits Tax (FBT). However, as vehicles are concessionally tax under the FBT Act, a novated lease is often the most tax effective way for an employee to purchase and maintain a motor vehicle.

There are two types of novated lease arrangements:
Novated Finance Lease – just the vehicle is leased and the employee pays for their own running costs
Fully Maintained Novated Lease – the vehicle and running costs are bundled into the lease

How it works:

  • A vehicle is leased from a Financier in the Employee’s name
  • The responsibility for the lease rental payments and all other responsibilities under the lease is transferred to Employer for the term of the Novation Agreement
  • In addition to the lease payments, all running costs (i.e. annual registration and insurance, fuel, servicing and repairs) in relation to the leased vehicle are also paid through the employee’s salary package

Fully Maintained Novated Lease:

Simplygreen provides a ‘fully maintained novated finance lease’ (FMNL) via its greenCar™ programme:

  • Provide a vehicle buying service for new & pre-owned vehicles, with access to substantial vehicle discounts
  • Arrange finance leases at competitive rates
  • Obtain the necessary approvals for the customer to proceed when ready
  • Organise comprehensive motor vehicle insurance
  • Calculate a vehicle expense budget based on the estimated number of kilometres to be travelled, covering the entire period of the lease for all operating costs associated with the motor vehicle including fuel, maintenance, registration, tyres, insurance and roadside assistance
  • Ensure the vehicle is operated entirely using the vehicle maintenance program
  • Provide monthly Activity Statements that show the actual vehicle expenses incurred

Novated Lease Training Video

Watch this short training video to learn more about the tax benefits of a novated lease

Calculate your savings in less than 20 seconds with our Novated Lease Calculator.

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