How the Novated Lease Works
Novated Leasing can be a simple arrangement. Subject to the employer’s policy, the employee selects the vehicle they want, the vehicle can range from a standard family sedan to a sports model or even a large four wheel drive. You can hear the employer’s crying now, I don’t want the expense of a large 4WD on the fleet. Employer’s note, the employee bears most of the running cost from his salary package. The employee is the primary lessee, he arranges the lease in his own name and must meet the financiers credit criteria. Once approved the employer “novates” the lease.
• The employer agrees to meet the monthly payment obligation to the financier;
• The employee’s gross income is reduced by an amount to cover this repayment obligation, the amount allowed for running costs and Fringe Benefits Tax;
• The vehicle is provided to the employee for unrestricted use, including private use
• Some employer’s reimburse the employees “salary package” with an allowance for business use, based on cents per kilometre travelled for busine