The Advantages of Offering Novated Leases
In the competitive landscape of talent acquisition and retention, businesses are constantly seeking innovative ways to enhance their employee benefits packages. One such offering gaining popularity in Australia is the novated lease. This blog post explores the myriad advantages of incorporating novated leases into your employee benefits program.
1. Tax Savings:
Novated leases provide a tax-effective way for employees to finance and operate a vehicle. By salary packaging their car expenses, employees can potentially reduce their taxable income, leading to significant tax savings.
2. Increased Employee Satisfaction:
Offering novated leases demonstrates a commitment to employee well-being and satisfaction. The ability to choose a vehicle of their preference, coupled with potential cost savings, contributes to a more content and engaged workforce.
3. Flexible Vehicle Choices:
Novated leasing allows employees the flexibility to select a vehicle that aligns with their personal preferences and needs. This flexibility enhances the sense of ownership and personalization, fostering a positive employer-employee relationship.
4. Financial Wellness:
Providing access to novated leasing supports employees’ financial wellness by spreading the cost of vehicle-related expenses over a fixed period. This can ease financial stress and enhance overall financial stability among staff.
5. Attracting Top Talent:
In a competitive job market, offering novated leases can be a unique and attractive benefit that sets your organization apart. It can be a decisive factor for potential hires, especially those who value flexibility and financial perks.
6. Reduced Fleet Management Burden:
For businesses with a company vehicle fleet, novated leases can transfer some of the management responsibilities to employees. This reduces the administrative burden on the employer, allowing them to focus on core business activities.
I’m an individual, how can this benefit me?
As most of our clients have a car this is an important question. Salary packaging a car is known as a Novated Lease. A novated lease (fully maintained) means that you are able to pay for your car, as well as all of its running costs, using pre‐tax dollars. This of course means that you are able to reduce your taxable income, and hence increase your take‐home pay.
Who can benefit from a novated lease? People are able to benefit from a novated lease even if:
- you use public transport to get to work
- you ride your bike to get to work
- you don’t have any business use for your car
- you don’t use your car every day or often
- you are looking to purchase a second hand car
- you want to retain an existing vehicle
- the car is for your spouse or children
Accessing a novated lease can reduce your taxable income, which is obviously the main benefit for many, however there are other benefits including;
- access to discounts (corporate fleet and servicing and repairs)
- purchases of new and used car – GST
- access to GST savings on the cars running costs
- ability to your choice of car (new or used)
- novate a lease car for your spouse or child (subject to sufficient earnings) or on your existing car
- access to the convenience of a fuel and maintenance card
- novated lease payments are made with fixed deductions from your salary
Comparison based on identical expenses, over a 3 year term, traveling 17,000 km per annum.
If you have questions about a novated leases, please contact your accountant or our office on (03) 9603 0066.