Novated leasing allows you to use pre-tax salary deductions as payment for all the running costs associated with owning and leasing a car – such as financing, insurance, registration fees, fuel, and servicing expenses.
At the end of your lease term, you pay an agreed-upon residual value which reflects its likely market value at that point in time.
The novated lease ATO vehicles has begun collecting data-matching details from novated lease providers in order to identify employees who fail to include after-tax contributions in their assessable income.
1. Tax savings
Novated lease vehicles are treated as fringe benefits; however, employees save money as monthly lease rentals and operating expenses (car insurance, registration fees, servicing costs, fuel/energy etc) can be deducted directly from pre-tax salary. Furthermore, GST on car running costs is reduced because finance providers can claim an input tax credit against GST fees paid.
At the conclusion of a novated lease, its residual value will have been set by the ATO and employees must repay that amount from post-tax income. If, however, the car sells for more than its residual value then any extra profit remains with its driver – one of the many advantages of such agreements.
2. Convenience
Novated leasing is a salary packaging arrangement where employees’ vehicle and running costs such as fuel, servicing, registration, insurance, and tyres are combined into one payment and collected directly from their wages to reduce taxable income and maximise take-home pay.
At the conclusion of each lease term, a residual value payment is made to employees. Automotive Lease Packaging makes this process straightforward with services including novated leasing, fleet discounts and online access to your novated lease account.
Call or visit us now to see how a novated lease ATO vehicles could benefit you! We offer free, no obligation quotes and can help with salary packaging.
3. Value for money
Novated leasing is a three-party deal between you, your employer, and a lease financier that gives all three parties more purchasing power – meaning discounts from car manufacturers as well as reduced servicing rates from lease providers who take care of multiple cars at once.
SG Fleet offers a fully maintained novated leasing program, complete with employee training, payroll integration and web access for reporting novated lease drivers.
Employee after tax contributions must be included in assessable income and reported to the ATO via a special fringe benefit label, to facilitate FBT audits by helping identify any taxpayer who fails to include their after tax contributions in their assessable income and use their novated lease for personal purposes. Through data matching processes this helps detect any irregularities with regards to FBT compliance.
4. Flexibility
Novated lease ATO vehicles offers you the flexibility of selecting a car that best meets your needs, from new or used, while taking advantage of fleet discounts[1] and web based fleet management reporting.
Finance and running costs are combined into one straightforward payment collected directly from your salary, maximising take home pay while decreasing tax liabilities. This payment includes fuel, insurance and servicing costs as well as registration and licence fees.
Changing employment may make your novated lease transferable to your new employer by simply paying its residual value; however, independent tax advice must first be sought to ensure it’s appropriate from a FBT perspective.
5. Reliability
Novated leasing can be one of the most cost-effective methods for Australians living on salaries to own an EV or PHEV, while offering employees access to fleet discounts and fully maintained vehicles.
SG Fleet makes it simple and affordable for employees to acquire new or pre-owned cars for use by providing guidance through the application process, selecting your car and providing support on the road – we handle it all.
Remember that novated leases are just part of salary packaging arrangements – they involve agreements among employee, employer and leasing company (usually Lendly). As part of its data matching activities, the ATO commenced asking Salary Packaging providers in April 2021 for information regarding their clients’ novated lease cars to supplement state and territory motor vehicle registries’ car data for FBT compliance audits.