Having a car is almost essential here on the Central Coast. For work, the school run or getting away for the weekend, a car provides no greater freedom. That freedom though comes at a cost. Not just car loan repayments but also the ongoing running costs. Novated leasing, a uniquely Australian perk, is designed to soften some of the financial blow of car ownership.
It’s probably not the first time you’ve heard of Novated Leasing. A bit like SMSF’s, those that have taken the plunge into Novated Leasing are often all too willing to talk about it, particularly at family BBQs! If you’ve previously just nodded along or not given novated leasing much thought, then this article is for you.
Car ownership costs in Australia
What is a Novated Lease?
A ‘lease’ simply means to rent, and ‘novate’ means passing responsibilities for payment to a third party. So, a novated lease is when an employer pays for the leasing of a vehicle on their employee’s behalf. In Australia, the employer can use the employees ’pre-tax’ income to make car leasing payments. This potentially makes the costs of car ownership tax-free.
What are the Benefits of a Novated Lease?
What are the drawbacks of a Novated Lease?
Types of Novated Leases
The type of novated lease you take can significantly change the costs and benefits depending on your own situation. These are the main options:
Whether or not a novated lease is for you is both a personal and financial decision. If you like having a new car replaced every few years, you plan to stick with the same employer for a while and you need to reduce your tax bill then novated leases might makes sense. On the other hand, if you change employers regularly and happy to pay upfront for a second-hand car and normally get a tax refund, then it might not make as much sense. Either way, it pays to get the right advice.
Saige Accounting & Financial Planners know the financial needs of the Central Coast. We can talk to you about the specific personal tax benefits and fringe benefits implications. We can also help you work out a long-term financial plan and if novated leasing forms part of that plan. Talk to us to discuss your novated leasing needs.