What is a Novated Lease?

A novated lease (“novation agreement”) is an agreement between an employer, employee and a lease company, where the employee leases a vehicle from the lease company, and the payments are made by the employer (the costs are then deducted from the employee’s pre-tax income). This process is also commonly referred to as salary packaging. Novated Leasing allows you to pay for the vehicle (including associated running costs) from your pre-tax salary, rather than after-tax. The general beneficial outcome is that the individual leasing the vehicle reduces their taxable income and ultimately saves on tax.

Benefits for the employee:

  • • Income tax (potential) savings
  • • Save on GST that would normally be incurred on vehicle expenses
  • • Volume discounts are potentially available (if the employer has many vehicles under this scheme)
  • • Individual selection of car (as opposed to a company car)
  • • Vehicle is associated with the employee (can be transferred to a new employer)

  • Benefits for the employer:

  • • Can be used as a cost effective alternative to a fleet of company vehicles
  • • Vehicles are not on the company balance sheet
  • • Can provide an effective increase in employees’ salaries with no or minimal cost to the business
  • • The business is not responsible for any risk associated with the vehicle(s)

Find out if Novated Leasing can work for you

Orchard Finance Services can review your circumstances and explain the potential benefits available to you. If you’d like to know if (and how much) you could potentially save by purchasing your vehicle through a novated lease, then call the friendly team at Orchard Financial Group or drop into our office at Maroochydore on the Sunshine Coast, to discuss your options today.