A novated lease is a tax-efficient way to finance your new car and associated costs. In addition, repayments are deducted from pre-tax salary, saving you money in the long run.
Fleet discounts can help offset the cost of your vehicle and ongoing running expenses such as fuel, servicing and registration. Then, all that’s left is to make your monthly or fortnightly payments.
Tax Benefits
Are you searching for ways to save on car finance? Then, Novated EV novated lease is the ideal solution. This type of car lease has numerous advantages, including tax savings.
A significant advantage of a novated lease is that a salary sacrifice arrangement reduces your taxable income, thus saving you tax. Unlike credit products and conventional loans with typically high-interest rates, which often come with little or no potential for saving on income taxes, novated leases offer more significant potential.
It is also worth remembering that a novated lease requires fringe benefits tax (FBT). Previously, this was applied in tiers based on how many kilometres an employee drove; however, there is one flat rate of FBT regardless of how long the employee uses the vehicle for business purposes.
Another benefit of a Novated EV novated lease is its GST-free repayments. It eliminates having to pay tax on top of your car cost, potentially saving you hundreds on monthly payments.
At the end of your lease term, you can take advantage of a residual payment which allows any excess value to be tax-exempt. It can be especially advantageous if you plan on selling your car privately and want any profits over what was paid back tax-free.
For instance, if you lease a new car for three years at an annualised rate of 32.5%, the tax savings would amount to $12,000 annually. It represents an impressive income tax saving when considering the current tax rate of 32.5%.
However, it is essential to remember that tax savings will only apply if your car has a low taxable value. Therefore, you should track business versus private use and total operating costs such as fuel, insurance and maintenance to determine which payment method is most advantageous for you; generally speaking, if your leased car has a low taxable value, it’s better to opt for an Operating Costs Method instead of Residual Payment.
Convenience
Novated EV novated lease are a convenient solution that offers numerous advantages to employers and employees. For example, businesses may find that offering a novated lease helps increase employee retention rates and reduce company administration expenses.
Employees looking for a car may find novated leases attractive as they avoid having to pay out-of-pocket or be stuck making regular car payments. With all repayments and running costs predetermined and budgeted, employees can enjoy worry-free vehicle ownership – including fuel, registration, servicing and insurance – without breaking the bank.
Furthermore, a novated lease can be a tax-efficient way to pay for a car. Since the monthly payments are deducted from an individual’s pre-tax income, they will pay less tax than they would if they had taken out a loan for the same car.
Third, if you decide to switch employers, your novated lease will end, and you must make all payments from your salary or find another employer who can continue the lease. While this can be tedious, it’s an efficient way of transferring ownership of a vehicle from your employer to yourself while avoiding an enormous out-of-pocket cost.
Choice
Novated leases offer a tax-efficient solution that takes the financial strain off purchasing a car. They permit you to lease either new or pre-owned vehicles in your employer’s name for an agreed-upon period.
They’re an excellent way to purchase and operate your car, as all related costs are included in a single payment deducted from your pre-tax salary. It makes budgeting and making payments day-by-day much simpler.
When looking into novated lease options for your vehicle, there are various factors to consider. They can apply to either new or pre-owned vehicles and whether the car has been entirely or non-maintained. You must find one that best meets your requirements and circumstances.
Another option is a budgeted finance lease, which lets you plan for maintenance services and set limits on how much to spend. This way, you’ll stay on top of your car’s expenses without any unpleasant surprises in the future.