Tax benefits of a novated car lease
Date posted: Monday, May 26, 2014
Are you looking at leasing a new car either for yourself or your business? While the finance options for leasing a new car can be a little confusing, the tax implications for you or your company should be considered before you get into your brand new ride.
Leasing a car involves providing regular pre-approved payments for the use of a car. At the conclusion of the lease period the car must either be returned, purchased so a new lease agreement for the vehicle can be established.
Car leases can also be wrapped into salary packages for both employees and employers to reap potential tax benefits. Novated car leases are a popular example of a leasing option, with benefits for both employees and employers. Put simply, a novated lease allows an employer to make lease payments for an employee’s car as part of a salary sacrifice arrangement.
The benefits of a novated lease for employees:
– Vehicle costs are paid from pre-tax income which means a lower rate of income tax is payable
– GST is removed from the financed amount
– Employees can select the vehicle of their choice and it is theirs to drive all the time
The benefits of a novated lease for employers:
– Lease payments are usually tax deductible on vehicles used for business requirements
– There is little to no cost to the business
– Lower employee costs, such as Payroll Tax
If you want to know more about leasing a car and how it can benefit you or your business, give us a call, send us an email or book in for a visit. We specialise in servicing individuals and businesses in the South Eastern Suburbs including Pakenham, Lakeside, Berwick, Nar Nar Goon, Garfield, Tynong and Koo Wee Rup.