If you are looking for Business Car Finance there are multiple options at your fingertips. Before you choose an option you should take some time to look at the options available to you and choose one that best suits your needs. A Novated Lease can be a beneficial way to secure financing that has advantages for both employees and employers.
What is it?
A Novated Lease is arrangement co-ordinated by a financier and made possible by the salary sacrificing options available. Firstly it is established that an employee needs a vehicle for business purposes and to circumvent big outlays by either the employee or employer a third party is involved: a creditor.
The employee secured a finance lease with the creditor whilst the employer agrees to take on the financial obligations outlined for the worker in the lease agreement. This means that the employer pays the monthly lease repayments on behalf of the employee using salary sacrificing which in turn gives them greater flexibility in their offer of a remuneration package to the worker.
If employment discontinues or the novation ends the financial obligations revert back to the employee and that is all that happens.
Who is it meant for?
This type of business finance will suit employees who are looking to include a vehicle as part of their package. If the employer offers salary sacrifice then it is an option for an employee.
Using a Novated Lease means that both the creditor and the debtor (employee) are able to claim an Input Tax Credit (ITC) for the GST attributed to the purchase of the vehicle and to the monthly lease payments themselves. This essentially makes the Novated Lease agreement GST-free. The exception occurs in two cases: at the end and early conclusion where GST is added to the residual value of the lease, usually both payable by the employee dur to ownership change.
Fringe Benefits Tax (FBT) a repayment benefit made normally to the employee based on the number of kilometres travelled. The more kilometres travelled the less FBT. This can also be offset through employee contributions to the maintenance of the vehicle and is worked out based on the Employee Contribution Method (ECM). The benefits will be being phased out by the Federal Government over the next three years and as such you should always seek professional financial advice as to the suitability of such lease agreements for your particular needs.
The benefits of a Novated Lease are different depending on whether you are the employee or the employer.
*You are able to influence the type of vehicle purchased to suit needs and purpose
*If employment changes you are able to take the car with you
*Car maintenance and care is under your control
*Repayments to the lease are done out of your pre-tax income, which could mean smaller running costs of the vehicle
*Equity is retained by you
*Ability to offer a more flexible and appealing remuneration package to an employee
*Residual risk is eliminated
*Superfluous vehicles are avoided if an employee leaves
*Administration for lease agreement is avoided due to Aussie Loans help and direction with the loan
*You save on Payroll Tax and WorkCover premiums