Novated Lease

1. You choose the vehicle to suit your needs. The consequence is usually a higher element of care and equity in the vehicle; A new, used or demonstration vehicle may be packaged subject to acceptance by the finance company;
   
   
2. You have full ownership of the vehicle;
   
   
3. In most cases (though not all) there is a tax-advantage as a car benefit is concessionally taxed;
   
   
4. The term of the lease is decided by the employee in consultation with Income Essentials and the finance company;
   
   
5. The vehicle is registered and insured in the name of the employee;
   
   
6. Operating costs for the vehicle are paid by the employee from pre-tax earnings (the lease costs may be partly paid post-tax, referred to as employee contribution method - ECM). Operating costs may include:
   
   I.   Insurance
   II.  Registration
   III. Maintenance
   IV.  Servicing / tyres
   V.   Fuel
   VI. Carwash
   
   
   
7. When changing employment the employee retains the vehicle;
   
   
8. The lease payment can include unemployment insurance to cover lease repayments for a specific unemployment period;
   
   
9. Equity accrued in the vehicle is of direct benefit to the employee.
   
   
10. FBT is not calculated on the costs paid (lease + Operating costs) in the FBT year. FBT is determined using the Statutory Formula Method as defined in FBT legislation and in most cases the FBT cost is less than the PAYG tax an employee would have to pay on the revenue sacrificed to cover the cost of the car benefit. The section Taxation of Approver Benefits covers the FBT calculation on car benefits.
    
    
11. The packaging benefit to an employee is greater the higher the kilometers traveled (private & business), across specific kilometre bandwidths. FBT is inversely proportional to total distance traveled. Kilometre brackets for FBT calculations are as follows:
    
    

    Distance travelled during the FBT year (1 April – 31 March)	Statutory rate (multiplied by the cost of the car to determine a person’s car fringe benefit)
    	Existing contracts	New contracts entered into after 7:30pm (AEST) on 10 May 2011
    		From 10 May 2011	From 1 April 2012	From 1 April 2013	From 1 April 2014
    0 – 15,000 km	0.26	0.20	0.20	0.20	0.20
    15,000 – 25,000 km	0.20	0.20	0.20	0.20	0.20
    25,000 – 40,000 km	0.11	0.14	0.17	0.20	0.20
    More than 40,000 km	0.07	0.10	0.13	0.17	0.20

    
    
12. A salary package is not limited to one vehicle and a package may contain both novated and associate lease vehicles.
    
    
13. A car is a lifestyle requirement for most employees and if this can be salary packaged giving the employee an increase in net take-home pay, it makes it an attractive and popular component in a salary package.