Sounds complicated, but it’s not, really – and it could have some serious benefits for your bottom line.
A novated lease, also called salary packaging a car, is a car loan and is an increasingly popular arrangement where an employee leases a vehicle from a finance company, and his or her employer takes over the financial obligations under the lease. Under most arrangements, the employer makes lease payments on the employee’s behalf, and then deducts the payments from the employee’s pre-tax income, leaving the employee with more take-home pay.
In addition to increased disposable income, a novated lease car loan can give the employee the benefits of choosing a car to suit his or her own needs and tastes; control over the use, care and maintenance of the car; and the ability to keep the car when changing employers (the lease can be transferred to the new employer or even to the employee, if necessary).

Employers find novated leases attractive because they allow businesses to increase benefits to their employees at very minimal expense, they are much more cost effective than purchasing company cars, and the employer does not assume any risk for the vehicles themselves.
With all the benefits for business owners and employees alike, it’s no surprise that the novated lease has become such a popular arrangement.

TAKE ADVANTAGE OF THE BENEFITS
A novated lease, also known as salary packaging a car, is a three-way agreement between an employee, an employer, and a finance company under which the employee leases a car from the finance company and the employer agrees to make the payments on behalf of the employee. The employer then deducts the amount of the payments, pre-tax, from the employee’s salary. You can use a novated lease calculator or car loan calculator to work out how much it can save.
This can be a fantastic benefit for you as an employee from both a financial and a personal perspective. Financially, it can amount to a pay increase because, instead of you paying for your car yourself with after-tax dollars, your lease payment is deducted from your salary pre-tax. This way, your taxable income is calculated on your salary minus your car payment, instead of just your salary as a whole, which amounts to less taxes and more money in your pocket. Also, you may be able to save on Goods and Services Tax (GST) when you enter into a novated lease.

From a personal standpoint, a novated lease gives you much greater flexibility than a company car, from beginning to end. Instead of choosing from a few pre-selected fleet vehicles, you’re able to find a car that fits your lifestyle and budget (subject to your employer’s policy, of course). And should you change jobs, your car goes with you – you can either transfer your lease to your new employer or arrange to make the payments on your own.
With so many advantages, salary packaging with a novated lease could be the choice for you.