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A novated lease is a tax efficient method of financing a brand new or second-hand automotive. It includes an worker establishing a ‘wage sacrifice’ association with their employer to lease the automotive. The worker is freed from any obligation to purchase the automotive on the finish of the lease interval.
Repayments on the lease are deducted from the worker’s pre-tax wage, which successfully reduces an individual’s taxable revenue and requires much less revenue tax to be paid.
Unlike a regular automotive lease, a novated lease doesn’t require the automotive for use for no less than half the time on enterprise functions. As most staff’ commute to work wouldn’t make up half its complete use, a novated lease offers an alternate leasing association.
With wages remaining stagnant throughout Australia, a novated lease appeals to many as a result of it offers a tax break. It can also be arguably extra obtainable than a pay rise, as a result of it doesn’t price the employer something additional.
An individual must be employed and obtain a wage to qualify for a novated lease so this naturally excludes self-employed sole merchants. However, an organization proprietor can have a novated lease in the event that they pay themselves a wage.