Also called: Salary packaged car lease
Novated lease
A novated lease is a three-way agreement between an employee, their employer and a financier, under which the employer takes on the lease obligations and deducts the payments from the employee's salary. It is a salary packaging arrangement, not a business loan.
What is a novated lease?
A novated lease is a three-way agreement between an employee, their employer and a financier, under which the employer takes on the lease obligations and deducts the payments from the employee's salary. It is a salary packaging arrangement, not a business loan.
Example
An employee packages a $55,000 vehicle on a five-year novated lease; the employer deducts the payments and running costs from pre-tax and post-tax salary.
Why it matters
Fringe benefits tax rules govern the outcome, and the arrangement usually ends if you change employers, so the exit position matters.