Novated leasing is a great way to provide additional benefits to employees without actually giving them a raise or spending more money.
A novated lease is a 3-way agreement between the employer, employee, and the finance company. Under these terms, the employer assumes responsibility of the lease as long as the employee remains with the company.
Payments are taken from the employee’s pre-tax income which results in a lower taxable income and higher take home pay.
In most cases, when employees have car plans, the employer chooses the vehicle to provide their employees. This is not always a good idea because the employee may not be happy with the car he or she will be driving.
With novated leasing, the employee is free to choose what car they will drive.
This is also a great way to save on tax because repayments will be taken from the employee's pre-tax income. The lease may also be transferred to a new employer or the employee can pay for it himself if he quits his current job.
The employers role is to take over the lease obligations of the employee as long as he remains with the company. If the employee leaves, the financial obligations is reverted back to the now former employee.