Imagine attracting new employees (or rewarding your current ones) with a shiny new car, and it doesn’t cost you any more than their current salary. If you’re an employer who is struggling to find new staff but don’t have the extra budget to match the demands of savvy job market candidates, we have a solution for you. Novated leasing benefits both employers and employees for a multitude of reasons.
Unlike other salary packaging benefits, a Novated Lease is available to all employers. Even if you just have a few staff, or even one, offering a novated lease can offer an employee the chance to drive their dream car and save on tax! Let’s take a look at how a novated lease can benefit you both.
So how does a Novated Lease work?
A Novated Lease frees up part of your employees’ pre-tax income to pay for the lease and the car running costs. Your employee has the choice of car, whether it be a new one or second hand. The lease is ‘Fully maintained’, which means that car costs such as fuel, maintenance, servicing and insurance are all covered, hence their popularity.
Car prices are high, as is fuel, and the reports on living expenses continue to be dire. In such a financially challenging time, being able to offer a car benefit that saves your employee money is a massive drawcard.
There is a misconception that Novated Lease is only for cars used for business purposes. In the past there were mandates on car leases that required employees to drive a certain number of business-related kilometres, these stipulations are long gone. There is now flexibility that a novated lease car may be used as part of a business arrangement, or it could simply be a personal use car.
More take-home pay in your employees’ pocket
If your employee is worried that they will be paid significantly less by having a car through their pay, the news gets even better. As you know, your employees are taxed on their gross salary at each pay cycle. If they are using their pay to make novated lease repayments, they will be taxed less on their remaining pay. This means more tax-free income in their pocket.
You can claim tax on leased cars!
Because novated lease cars are effectively leased through your company, you can claim on the lease and the running costs of the car for a healthier, happier tax outcome at the end of the financial year. These savings can be significant if you have multiple employees that take advantage of this benefit. Novated leases are a particularly attractive incentive to reward and retain employees and remember, you don’t have to have an FBT-exempt status to offer it.
What happens to the lease if my employee leaves?
Your obligation to pay a novated lease is only while your employee works for you, or the lease is current. Therefore, if your employee finishes working for you, it is their responsibility to pay for the lease and all the car running costs. If they are able, they can transfer the lease to their new employer, only if the new employer offers novated leasing. Because not all employers allow their employees to have a novated lease, they have been proven to help retain staff. In other words, you won’t be the one stuck with the bill if the employee decides to leave or is terminated.
How do you set up novated leasing for your employee?
It’s actually quite a simple process to offer this to your employees if you partner with a salary packaging company. In terms of paperwork, you’ll need to sign a novation agreement where you agree to make repayments on the employee’s behalf, as long as they are working for you. When it comes to arranging the car and pay deductions, your salary packaging provider will handle this for you as well as keeping your employee updated about the balance of their car running costs. They will also arrange fuel cards and be the go-to when it comes to claiming maintenance, servicing, insurance and other car-related expenses that are covered within the lease.
Offer Novated Leasing with The Salary Packaging People
As Western Victoria and Geelong’s first choice for salary packaging solutions, we’ll help you attract and reward staff with novated leasing options for your employees. Contact us or call 03 5229 4200 and talk to a real person today.