Novated lease

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A novated lease is a special kind of motor vehicle lease that is common in Australia that allows employees to operate personal motor vehicles in a tax and cost effective manner when compared with more traditional forms of leasing.

In the UK, a novated car lease is a car lease which has been 'transfered' to a third party with the consent of the lessor, the original leasee and the prospective leasee. The transfer of liability for the lease, between two legal entities, is normally covered by tri-partite contract, UK based leasing companies have different methodologies, conditions and processes. Swapping car leases is a relatively new phenomenen in the UK although the market for novating leases is now well established in the USA.81.105.82.122 21:15, 20 January 2007 (UTC)

'Novated' refers to an agreement between the employer, the employee and the financier of the vehicle, whereby the employer typically agrees to meet finance lease payments and vehicle running costs while the employee remains employed. In return, the employee 'sacrifices' a portion of their salary to cover the cost of the finance. If the employee ceases employment with that employer, they retain the vehicle, but then become responsible for all leasing and operating costs. The arrangements however may be re-continued with a new employer.

There are two types of Novated Leases, a standard 'novated lease' which is finance only and a 'fully maintained novated lease' which includes all the running expences of the vehicle. The latter type is more common and more popular.

Under these arrangements, certain benefits arise for both the employee and the employer including:

Contents 1 For the employee 2 For the employer 3 See also 4 External links

[edit] For the employee

• possible significant income tax savings
• savings on GST that would normally be incurred on vehicle expenses
• Access to volume discounts if the employer has many vehicles under this scheme
• more flexibility in the choice of a car compared to a 'company car' arrangement
• can be transferred to next employer

[edit] For the employer

• A way to effectively increase employees' salaries with no or minimal cost to the business
• A more cost effective alternative to operating a fleet of company vehicles
• employee vehicles are 'off balance sheet'
• Access to GST input credits for vehicle expenses

[edit] See also

• Employee benefit
• Fringe Benefits Tax

[edit] External links

• Novated leases questions and answers from the Australian Taxation Office