Novated leases are agreements between three parties: the employer, the employee and the financier.
The employer takes payments from the employee’s pre-taxable income for the costs associated of the vehicle. This provides a vehicle for the employee’s use, as part of a salary packaging arrangement.

Request an online quote.

1300 547 226

The Novated Leasing & Salary Packaging process

Obtaining a novated lease through Auto Car Finance is an easy step by step process, which gives you plenty of options. You can choose the car either new, used, private sale or dealer. All privately sold cars are subject to our vehicle inspection safety-net to ensure the vehicle's quality - giving you the confidence to buy privately rather than paying more for the warranties and compulsory safety checks offered by dealers. Generally, better buys can be found privately as you can meet the previous owners and negotiate on price.

We offer a full spectrum of lenders including credit unions, banks, conforming and non-conforming. Competitors will limit you to only a handful of lenders and specific dealerships to purchase from. At Auto Car Finance, our fleet management company can manage any car lease.

Once you have found the car and arranged the novated lease, a portion of your income comes out of your pre-tax and post-tax dollars. With a fully novated lease a portion of your income is also deducted for the running costs of the vehicle. PAYG income tax is calculated on your reduced salary this effectively increases your net disposable income as you pay less tax.

At Auto Car Finance, we let you choose the fleet management company. Competitors are restricted, most fleet management companies have contracts with financiers as a result you pay a more fees, charges and higher interest rates. It’s different with us because you choose the best components of the process to fully tailor your needs.

Types of Novated Car Leases

Traditionally, a novated lease gives you the option of either Fully Maintained novated lease, or Non Maintained novated lease. A fully maintained novated lease means the lease payments come out of your pre-tax income as well as the operating costs for the vehicle.

Operating costs in a fully maintained novated lease can include:

• Lease rental
• Fuel costs
• Service and maintenance
• Registration
• Tyres
• Comprehensive insurance
• Road side assist

In a fully maintained novated lease, you decide what operating costs you want. For example, you might only choose fuel, comprehensive insurance and registration. The average cost of fuel per month might be $250.00 - so if you only use $200.00 one month, then you'll be $50.00 in credit. You are only charged for what you use; we don't keep any remaining surplus at the end of the novated lease.

A non maintained novated lease means only the payments of the lease are salary packaged. The operating costs are paid by the employee from their post-tax income on their own accord.

Employee Benefits of a Novated Lease:

• Unconditional use of the vehicle for both work and private purposes
• The option to own the vehicle outright at the end of the lease term tax savings through salary sacrifice arrangements as the lease payments are taken out of their pre-tax wages
• Freedom to choose the vehicle they want, don’t have to choose from company fleet.
• The responsibility of the loan repayments are left to the employer unless the employee changes employers.
• Savings are available through vehicle discounts on the purchase of the vehicle through our accredited dealer network.
• We provide the flexibility and freedom to choose the vehicle you want, lease term you want and services that you want
• An increase in disposable income through salary packaging your vehicle costs
• Employees can save money and reduce their taxable income and increase disposable income
• Access to corporate discounts for tyres, maintenance, insurance and finance for their vehicle
• Ability to package all vehicle costs into a single monthly deduction
• Unlimited private use of the vehicle can be 100% private usage
• Substantial GST savings available to the employee
• Simple process, speedy, efficient and you can be driving away in your new car in a few days
• Customer service that provides flexibility and real service
• We can assist with sourcing and liaising with car dealers on your behalf. Not everyone enjoys negotiating and spending their time driving from dealership to dealership to source their vehicle and negotiate a price
• More flexibility in the choice of a car compared to a company car arrangement
• Vehicle stays with the employee and can be transferred to a new employer
• The term of the novated lease ranges from 12 months to 60 months
• The repayments are fixed over the term of the loan
• As the financier is the owner of the motor vehicle, they claim the GST on the purchase price, meaning that the employee finances the GST-exclusive amount.
• If the employer passes back to the employee the input tax credits, the employee is effectively paying the novated lease and running costs net of GST
• Fill up with a fuel card: present your card at a large number of participating service stations to purchase fuel. Purchasing with your fuel card entitles you to a discount, and is automatically logged for your quarterly driver reports.

Employer Benefits of a Novated Lease

• Takes away the burden of managing a company car fleet;
• Takes away the necessity of recording the car as an asset or liability in the business;
• Offers an income tax deduction for all payments made under the agreement, including lease rental payments;
• Offers many employers, if registered for GST, the ability to claim an input tax credit on the GST paid on the lease, (there are exceptions to this); and
• Takes the responsibility of making lease payments away from the employer as soon as the employee leaves their job.
• No residual risk
• No excess vehicles if an employee leaves
• Employer can provide a more attractive remuneration package, and therefore attract the employees they want
• Reduced administration time and costs (compared to company cars)
• A professional facility that enables employers to offer staff significant benefits with no employer cost
• Great option for retaining and attracting employees to the organisation

Fringe Benefit Tax (FBT) of a Novated Lease

When an employee is offered a benefit from an employer, the benefit may be subject to FBT. FBT is a federal government tax payable on the benefits value. When a vehicle is salary packaged, it is calculated using the statutory formula method. 

Table 1 : Statutory Percentages

Salary packaging a vehicle is concessionally treated for FBT purposes and therefore may be tax-effective. No distinction is made between business and private use making it an attractive option for employees who have little or no business use.

The FBT is calculated using a formula involving the statutory rate, the amount of km’s travelled per annum and the amount of remaining days in the year. It is important to estimate the number of kilometers travelled each year accurately as a miss calculation results in the employer having to pay a higher rate of FBT.  The FBT year operates between the 1st of April and the 31st of March.

Employee Contribution Method (ECM) on a Novated Lease

For employees to avoid having an FBT bill at the end of the year, post tax deductions are made by the employers.  For example, if your fully maintained lease costs you $900.00 per month you might pay $750.00 pre tax and $150.00 post tax.  What this means is by paying the $150.00 after tax you are reducing your annual FBT debt to zero.

GST on a Novated Lease

The purchase price of a vehicle includes GST if the seller is registered.  As the GST is paid to the Australian Tax Office the finance company claims what is known as a input tax credit (ITC).  The ITC is the same amount as the GST on the vehicle currently up to $5,224.18.  As the finance company can claim back the ITC they then pass on the savings to you in your monthly repayments.  If you sell the vehicle before the end of the term you will pay the GST on the amount that’s remaining on the lease.

There are many savings to be made by doing a novated lease. For more details please call 1300 547 226 or apply online. We will take you through the process step by step and explain any questions you may have along the way.

Statutory Formula Method

Statutory Rates