NovatedleasingisapopularwayforAustralianstofinanceaneworusedvehiclewhilealsoreducingtheirtaxobligations.It’saformofsalarysacrificingwhereyourvehiclepaymentsaredeductedfromyourpre-taxsalary,effectivelyreducingyourtaxableincome.
Theprocesstypicallyinvolvesthreeparties:theemployee,theemployer,andthefinancecompany.Theemployeeselectsavehicleoftheirchoiceandappliesforfinancewithanovatedleaseprovider.Onceapproved,theemployeeandemployerenterintoanovationagreement,whichallowstheemployertomaketheleasepaymentsonbehalfoftheemployeeusingtheirpre-taxincome.
Oneofthekeybenefitsofnovatedleasingisthepotentialtaxsavings.Byhavingtheleasepaymentsdeductedfromyourpre-taxsalary,youeffectivelyloweryourtaxableincome.Thiscanresultinalowertaxbillattheendofthefinancialyear,aswellasincreasingyourtake-homepay.Additionally,GSTontheleasepaymentsisalsopaidwithpre-taxdollars,furtherreducingyouroverallcosts.
Anotheradvantageofnovatedleasingistheconvenienceandflexibilityitoffers.Theleasepaymentsaremadeautomaticallybyyouremployer,soyoudon’thavetoworryaboutrememberingtomakepaymentsorbudgetingforthem.Youalsohavetheflexibilitytochoosethevehiclemakeandmodel,aswellastheleasetermandkilometrelimit,tosuityourneedsandbudget.
Therearesomeconsiderationstokeepinmindwhenitcomestonovatedleasing.Forexample,ifyouleaveyourjoborchangeemployers,thenovationagreementmayend,andyoucouldberesponsibleformakingtheleasepaymentsyourself.Additionally,whilenovatedleasingcanprovidetaxbenefits,itmaynotbethemostcost-effectiveoptionforeveryone.It’simportanttocrunchthenumbersandcomparethecostsofnovatedleasingwithotherfinanceoptionsbeforemakingadecision.
Inconclusion,novatedleasingisapopularwayforAustralianstofinanceavehiclewhilealsoreducingtheirtaxobligations.Byhavingtheleasepaymentsdeductedfromyourpre-taxsalary,youcanpotentiallysavemoneyontaxesandincreaseyourtake-homepay.However,it’simportanttoconsiderallfactorsandcomparecostsbeforedecidingifnovatedleasingistherightoptionforyou.