What You Need to Know About Novated Leasing
Novated leasing has been getting more and more popular in Australia and for a good reason; it’s a tremendously cost-effective way for salaried employees to get their hands on a new car. One of the tragedies of car ownership in Australia is that people make purchase decisions that aren’t financially astute. It can leave them locked into years of inefficiently paying back high-interest loans. With novated leasing, you can make your money work for you more effectively. The result is more disposable income to spend and a delightful new car for you to drive around in. If this sounds like your kind of deal, then read on to discover what Novated leasing is all about.
Novated Leasing Increases Your Disposable Income
Probably the most significant benefit of novated leasing is that it mobilises your pre-tax earnings and puts them to work for you. To illustrate let’s look at Peter; Peter earns $120,000 a year – this puts his marginal tax rate at around $0.37 for every dollar he earns. Peter takes out a traditional car loan and makes repayments of $500 a month to the lender. Had Peter opted for the same car using a novated lease arrangement, his employer could make the payments on his behalf using his pre-tax earnings, therefore increasing his spending power. It would mean that instead of paying $500 per month to service his car loan, Peter’s car would be packaged with his salary and the impact on his take-home pay would only be approximately $352. That would mean that Peter had successfully and without breaking any law, avoided paying an extra $142 in income tax. That’s almost $1800 in a year – enough for a lovely little holiday. Use our free tool to calculate just how much you could save.
Novated Leasing Avoids GST
We get to claim the GST back on the vehicles that we purchase, and we pass this saving on to you. Since the vehicle that you choose is not part of our taxable supplies, the GST is claimed as an input tax credit on our business records. It means that a novated lease is the only method by which a salaried worker can dodge the GST without breaking the law. The savings from this are not insignificant – GST typically accounts for one-eleventh of the price of the car. So, if your dream car costs $60,000 – with a novated lease you can get over $5,400 off, which I think you’ll agree, is not too shabby for a discount.
Novated Leasing Allows You to Change Jobs
Given that your employer is packaging your car with your salary, it’s common for people to be concerned that if they change, then they’ll be in trouble with their novated lease arrangement or won’t have a car to drive. It isn’t true, however – we’ll work with you, no matter what situation you find yourself in. While technically you are leasing the car, in a practical sense it’s your so it will go with you. We can help you to incorporate your novated lease into your new job.
Novated Leases Are Permitted for Personal Use
You might be wondering that since your novated lease is being paid for by your employer, that you should only be using it for work purposes. It is also not true – novated lease cars are OK for private use. In fact, there is a concession in the fringe benefits tax regulations designed to encourage folks to get a novated lease on their personal vehicles.
Novated leasing is a smart way to make your hard-earned money go further. One of the perceptions about Novated leasing is that it involves a whole load of administrative work. It couldn’t be further from the truth. We work hard to make the process as transparent and straight-forward as possible. If you’re looking for the best value novated lease in Australia, then give us a call today to see how we can save you money.