| Top Money-Saving Reasons to Choose a Novated Lease
Both employees and employers can realize cost savings as well as other benefits through participating in this three-way arrangement. Basically, an employee chooses a vehicle he/she wishes to lease and the employer takes on the lease obligation, paying the monthly payments from the employee's pre-tax income. Some of the valuable benefits of the novated lease are as follows:
FOR THE EMPLOYEE:
1. Income tax savings - Because the payments are taken out of pre-tax income, you can save money by having a lower tax rate on this benefit than on the running costs calculated after tax income.
2. GST will only be paid by the employee on the residual value at the conclusion of the lease. Because the operating costs and finance charges are considered "related benefits" they are both GST and income tax-exempt.
3. Having 100% use and control over your vehicle means it is available to you whenever you want to use it. You can also determine who else rides in it or drives it and how well it is maintained.
4. If the employer is large enough to offer this service to many employees, you may be eligible to benefit by the discounted savings that the company will have earned.
5. If you leave the company by choice or not, you can take your vehicle with you. A new employer can pick up the lease agreement as part of your next remuneration package.
6. You can also choose the vehicle to lease that meets your specific needs. No more driving one of the company fleet cars that are uncomfortable or unpleasant to ride in.
7. Any equity value that the lease vehicle may have gained while in your possession is yours to keep if the vehicle is sold at lease end, and the profit is tax free.
8. Lease payments for your vehicle are fixed for the entire term of the list which is usually 24-60 months.
Employers can also benefit from the novated lease agreement. No longer will they have the expense of idle company fleet cars sitting around on the lot. Nor will they have the maintenance, insurance and risk factors that go with owning company cars. Since this benefits package can be easily and affordably incorporated into a remuneration package to attract new employees, it becomes a win-win proposal for all parties involved.
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