Home Finance Cashflow Three business benefits of entering a novated lease

Three business benefits of entering a novated lease

Analysing the benefits of some products and services can be difficult. Understanding the benefit of one loan over another can be confusing and comparing the benefits of one car over another can be close to impossible.

To the newcomer comparing the benefits of a novated lease agreement can seem impossible. With this in mind we decided to go over some of the main benefits of the service to help you understand why they are increasing in popularity amongst the Australian public.

1. Tax advantages

The biggest advantage of a novated lease comes down as the tax benefit. This benefit has the power to save you on both income tax and goods and services tax. Income tax is saved as the novated lease payments are taken directly from your salary package. These payments are taken from your salary pre-tax and the net result is a lower amount available for the tax man to take his share. This is good news as ordinarily car payments are taken from your post tax take home pay. In addition to this GST is also saved on a number of vehicle expenses including the purchase price.

2. Clarity

In the past novated leases were confusing, awkward and laden with unusual kilometre limits and thresholds. As of March 2011 the Fringe Benefit Tax (FBT) rate will be harmonised across all kilometre rates. This means in two years it will no longer matter how many kilometres you rack up. Add to this the huge improvements in online account access on both desktop and mobile devices and a novated lease is now the convenient choice for managing your vehicle expenses.

3. Flexibility

A novated lease will allow you purchase your vehicle from a range vehicle types including new and second hand vehicles. In addition new cars can have extras added on within the lease. Moving on from just vehicle purchase options the flexibility within the lease is obvious as lease holders can in fact change some details of the lease whilst the lease is in progress. Considering how quickly Australian employees move jobs has also been taken into consideration. There are many differing options for lease holders who move jobs or end their current employment.

These leasing arrangements have many and varied benefits. The trick is to understand all of the benefits on offer and relate them to what you are looking for in your next vehicle. While it’s rare that you will be able to know what will come in a year or four years’ time it still pays off to plan as much as possible. Planning any purchase which saves tax, generates discounts and offers you budgeting help makes sense.

In addition, a novated lease should be thought of in comparative terms. Once you compare the like-for-like benefits of the lease type with standard finance you realise the difference. In the end most big vehicle purchases will need to be paid off over a number of years. So why not save some tax and discounts while you’re at it?

Rory Deeganhttp://www.fleetcare.com.au/
Rory Deegan is the Online Marketing Coordinator at Fleetcare. He has written over 100 blogs and articles for Fleetcare on the topics of fleet management, novated leases and other car topics. Fleetcare is an Australian fleet and novated lease management firm with offices all over the country.