Novated Lease-A Favored Form Of Salary Packaging
Over the years, leasing cars for business associated activities has grown out to be pretty extensive practice, across the world. Whether you take the case of a big firm or a hotel series, leasing cars meant for business uses is reasonably universal these days. Companies moreover have a preference for leasing cars as it is a lot more commercial option that allows them to lease a car for a predetermined time at a smaller amount of money.
In modern times, a variety of options have achieved recognition amongst companies looking at, leasing a vehicle. Of these, novated lease is possibly the most favored choice.
In Australia, a novated lease agreement usually consists of two contracts. To begin with, an agreement to lease a vehicle among an employee and the leasing company. Afterwards, there is a three way agreement between an employer, employee and leasing party, under which the employee hand over their lease payment to their employer with the approval of the employer and leasing company. The employer then puts together the lease payments in support of the employee, and subtracts them out of the employee’s pre-tax earnings (identified as salary packaging a vehicle).
The process of a novated lease:
If your boss recommends Novated Leasing, as a salary packaging alternative, in that case, you can always decide on an automobile that goes well with, your standards of living. You can select the make and model, latest or second-hand, sedan, wagon, 4WD, etc., devoid of, any of the limitations typically instituted with a conventional company fleet. You enter into a finance agreement in your individual name to ultimately have the possession of the chosen vehicle.
Once all this is concluded, you, your employer and the finance company all sign a Novation Agreement. Your employer is in agreement to undertake your responsibilities (repayments) to the finance company, and is liable for the entire decided vehicle operating expenses, which are taken away from your salary as element of your salary packaging agreement.
You consent to “salary surrender” a part of your wages in return for the advantage of a car, up to a specified amount. With Novated Lease, the lease, operational expenses of the vehicle and Fringe Benefits Tax (FBT) are deducted from your pre-tax salary, and PAYG income tax is evaluated on your abridged salary. This eventually can successfully enhance your net non-refundable income as you pay a lesser amount of tax.
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