Fully Maintained Novated Lease (Salary Packaging)
A Fully Maintained Novated Lease is a method of salary packaging a car and its operating costs, under which an employee leases a car and the employer agrees to take on the employee's obligations under the lease, paying the monthly lease rentals and operating expenses from the employee's pre-tax income.
This is distinct from a Non-maintained Novated Lease, where only the lease rentals are deducted from the employee's pre-tax income. A Novated Lease is the most common form of salary packaging a car.
How does a Fully Maintained Novated Lease work?
A Novated Lease is a three way agreement between an employer, employee and finance company whereby the employee enters into a Car Lease (Finance Lease) with the financier and the employer agrees to take on the employee's obligations under the lease. In addition to the lease rentals, the car's operating expenses are also deducted from the employee's pre-tax income. Some examples of the types of operating expenses that can be packaged are:
- Fuel & oil
- Service, maintenance & tyres
- Registration & insurance
- Accident management
Under this arrangement, the employer pays the monthly lease rentals on behalf of the employee, and provides the vehicle for the employee to use as part of their salary packaging arrangement. If employment ceases for any reason, or the lease agreement is finalised, the Novation ceases and the obligations assumed by the employer revert back to the employee. The employee can then renovate their lease with their next employer.
Benefits of a Fully Maintained Novated Lease
- Save money - a Fully Maintained Novated Lease reduces the income tax you pay, and also saves you GST on the purchase of your car and its operating expenses
- Choice - you can choose the car that best suits your personal needs
- Control - you control the car, including care and maintenance
- Portability - you can take the vehicle and lease with you if you change jobs
- You retain any equity built up in the vehicle, not your employer
- All the other regular benefits of a Car Lease (Finance Lease), including flexible residuals and loan terms, and low interest rates
- Vehicle is registered in your name
- No business use requirement
- Tax effective
- The ability to offer a more flexible remuneration package to your employees with little-or-no extra cost to your business
- No residual risk, nor excess vehicles if an employee leaves
- Significantly reduced administration time and costs compared to operating a traditional company fleet
- Reduced on-costs such as Payroll Tax and WorkCover premiums
- stratton allow you to completely outsource Novated Leases, saving you time and money
Who does a Fully Maintained Novated Lease suit?
A Fully Maintained Novated Lease suits any employee who wants to include a motor vehicle and its operating expenses as part of their salary package, so long as their employer offers salary packaging.
As a result of changes announced in the Federal Government's 2011/2012 Budget, from 1 April 2014 the number of kilometres travelled no longer has any effect on an employee's FBT liability resulted from novated lease arrangements.
Want to know more?
You can read a detailed explanation of Novated Leasing including how it works, the benefits, traps and tax implications in our article Novated Leasing & Salary Packaging - A Detailed Guide.
If you are an employee and have any questions or would like to know more about a Fully Maintained Novated Lease, please send us a quick online finance enquiry or call us on 1300 131 050 and one of our experienced Novated Lease finance consultants will assist you. You can also get an instant online Fully Maintained Novated Lease quote in less than 60 seconds! You may also wish to consider other individual car finance options.
stratton can assist you with the establishment and operation of a Novated Leasing program for your employees at no cost, while also making the process simple and hassle-free. You may also wish to consider other business car finance & business car loan options.