Why offer novated leases?

A novated lease offers employees the ability to pay for a car and all running costs out of their pre-tax income. Novated leases appeal to all employers, regardless of size, as they are an easy way to offer employees salary sacrificing on a popular (and high ticket) item.

Unlike standard car loans, which draw from your staff’s post-tax income, novated leases allow your staff to tap into their pre-tax income and reduce the amount of income tax they pay.

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There are other benefits too:

1. Your staff will avoid paying GST on the car as well as running costs.
2. Your staff can get access to fleet pricing.
3. The alternative – buying a car outright – is waning in popularity, as it involves an extremely high up-front cost on a depreciating asset, something that savvy Millennials and Gen Z’ers seek to avoid.

You can probably start to see the huge value to employees looking to save costs, especially on their biggest expense (after their home).

How it works

The novated lease can offer huge savings for employees, but best of all it’s simple for employers to set up with almost no paperwork - and it’ll cost you nothing out of pocket. Remember: Your team will thank you for it. Possibly even love you. Yep, we’ve used the “L” word.

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Onboarding‍

It’s super simple to set up novated leasing. With us, there’s bare minimum paperwork – you only need to sign a one-page novation agreement (which simply says that you’ll make payments on your employee’s behalf while they’re employed with you) and an invoice confirming the amount you will pay.

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Employee setup‍

For each employee, we’ll provide you with the pre-tax and post-tax deductions to enter in your payroll system (e.g. MYOB, Xero, etc). And then it’s ‘set and forget’, so it doesn’t take more time and energy from your finance team.

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Payment options‍

You can send us payments on your employee’s behalf via direct debit or EFT, and this can be set on the same date the pay cycle happens for simplicity. If you choose direct debit, you only need to sign the usual direct debit terms and conditions. And that’s it.

Employer responsibilities

You need to pay the agreed salary sacrifice amounts in your regular pay cycle.

You’ll need to account for any FBT liability, however once again, we’ll be able to guide you here and provide a solution resulting in zero FBT liability.

And that’s about it. It’s that easy.

You aren’t responsible for the leases themselves - your employees are. And if a member of your staff who has a novated lease leaves your company for any reason, your obligation to make payments ends at that time. There are no ongoing obligations once their employment has ended.

If you choose us as your novated lease provider and get stuck at any time, you’ll have a dedicated relationship manager that you can contact for fast help.

A few points to consider

Novated leases are safe for employers and don’t come with risks - just some considerations .

Liability

The financier agreement is signed by the employee (which specifies non-liability of the employer). There’s no liability to you, and the employee retains the liability to pay the lease if they leave too. You simply agree to make payments on the employee’s vehicle from their pre-tax income whilst they are employed by you.

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Fringe Benefits Tax

You should seek a novated leasing provider (like us!) that strives for $0 fringe benefits tax (FBT) liability for your company and knows how to offer the most cost effective FBT solution.

A good provider will:

1. Offset any FBT liability you may have.
2. Make sure everything is clean, accounted for and managed.
3. Provide FBT reporting.

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Cost to you

With a good novated lease provider (again, we can’t recommend ourselves highly enough), offering novated leases becomes a cost-neutral process for you. That is, it won’t cost anything to offer. Some providers may include management or other fees, so ensure you check this before selecting a provider.

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What happens if my employee leaves?

The novated lease lives with the employee, so should they leave, they take the novated lease with them and pay it themselves until they find a new employer. You don’t need to transfer the lease to their new employer.

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Will I be locked to one provider?

The short answer is – not if you choose the right novated leasing provider.

Some providers may try to tie you into an exclusivity deal so that you only use them. However, there are great providers who will never send you a lock-in contract and won’t ask you to sign anything other than the basic obligation to make payments for an employee as part of payroll, and that’s it.

At Leaselab, we never ask for exclusivity or lock-in contracts. We don’t need a contract to keep competitors at bay. We believe that our commitment to and focus on customer service speaks for itself, and that’s why our clients choose to partner with us.

If flexibility is a concern for you, make sure you find a provider who clearly leaves full control in your hands. With a good provider, the service should take almost no time and cost you nothing at all.

The bottom line

Novated leasing can provide a positive, meaningful contribution to company culture. No doubt your HR team or People & Culture team would love being able to offer novated leases as a part of the company’s rewards program.

Given the savings, in a way it’s like being able to give staff members a significant pay rise without spending a cent. With Leaselab, it’s simple to set up with almost no paperwork and it’ll cost you nothing out-of-pocket.

And then there’s the whole part about your employees loving you for it. And who doesn’t want to be loved?

We get companies of all shapes and sizes

We help organisations of all sizes - from SMEs, to ASX-listed, to government bodies. But we particularly delight in the chance to help SMEs to optimise their offering.

As we know, salary sacrificing – and particularly novated leasing – can make the world of difference to smaller companies building a culture and striving to improve their team’s experience.

We also love hearing from company founders and representatives like you. We’re here to answer questions, explain the process and generally make things happen. So give us a call on 1300 888 594 and let us help you get set up.

Or, if you’d prefer, you can submit the enquiry form below and someone from our team will be in touch before you know it!