The novated car lease is a very popular option for people in Melbourne now because there are so many benefits to the person that is leasing the car and their employer. Here you will learn how a novated car lease works and the basics you should know before you consider this kind of lease.
What is it?
A novated car lease is an agreement that you have between yourself, your employer, and the finance company. All of the leasing agreements go to your employer, and they take over all of the responsibility to pay the lease, maintenance, insurance, registration, and cost of running. This cost is paid by you and is usually deducted from your paycheck, but you will see a lower tax bill.
• This kind of leasing takes a burden off the employer to keep a fleet of company vehicles.
• The also don’t have to record the vehicle as an asset or liability to their business.
• There is a tax deduction for all payments made under the employees lease agreement.
• Employers can register it for Good and Services Tax and can claim this tax on any payments make on the lease.
• The responsibility of making payments on the lease end if the employee leaves their job and then they are responsible for all the payments.
• The employee will save in taxes because their payment will be taken out of their pay before taxes are taken out.
• They can choose whatever car they want.
• They can use the car for work and personal use.
• They can own the car after the lease agreement ends.
• If they leave their job, they have the option to transfer it to another employer if they agree or they can just take over the payments themselves.
Fringe Benefits Tax
The Federal Government Tax, Fringe Benefits Tax provides tax benefits to their employees that are paid by their employer. This amount is determined by the value of the car. This helps offset the after salary tax, which cancels the salary tax benefits of their employees and is charged to the employee as a tax deduction.
Benefits of a Novated Car Lease
People who benefit the most from a novated car lease are people that are in a higher tax bracket because the deductions are taken out of their pre-tax wages. If you use your car a lot, then you will benefit most because it will calculate the distance you travel every year and also the value to get the Fringe Benefits Tax, which makes your pre-tax wages lower and you pay fewer taxes. This might be a good option for you, but you would need to discuss this leasing option with your employer to find out if they will consider a novated car lease. For more information visit this website for novated car leasing http://www.1alp.com.au/novated-lease/