Novated Leasing or salary sacrificing as it can also be known has been available in Australia for a long time however a novated lease's benefits are still not well known. Often, the question still arises, are novated leases still worth it? The best way we thought would be to talk about the three top ways you can save money with a novated lease so you can make up our own decision.
GST On The Vehicle
One of the most powerful savings elements to a Novated Lease is the GST implications. Firstly, if you buy a new, demo or used car from a GST registered entity (I.E. any dealer ever) you won’t pay GST on the purchase price of the vehicle. Pretty cool? Yes. Yes it is. There is a limit which is currently set at $5,234.64 but it means for your average car, you are in the clear. If you buy from a private seller, there won’t be any GST payable so there won’t be any to save.
This is probably most poignant when looking at a new car. The person right next to you at the dealer could be buying exactly the same car, for exactly the same price but yours is 10% cheaper.
GST On Running Costs
The next big winner is the GST impact on the running costs of your vehicle. When you get a fully maintained novated lease, you will add all of the running costs required into budgets that are deducted from your pay. Then, when you pay for these things (think of fuel, car washes, servicing) you pay for everything GST free. You will need to submit the tax invoices to your fleet company and then they will do the rest to help feed the information back to your employer who will be able to process the tax credits. Make sure you talk to your employer and fleet company on how this one worlds.
Income Tax Savings
This is one of the more commonly known but less commonly understood elements to a Novated Lease. When your employer pays the fleet company for your lease payment and running costs, some of the payment will be deducted from your pre-tax earnings meaning you won’t have to pay as much income tax as you once did. It reduces your taxable income and thus reduces your total tax payable.
If you are unsure or are keen to understand what a novated lease could mean for you, the best thing to do is speak to a Novated Leasing Company like Novate It. Novate it put you in touch with the best in the business and provides all the information you need to make an informed decision.
A Novated Lease can be an incredibly powerful tool that helps you save money. There are pros and cons to all things but if you are looking at a new or used car, you should definitely consider a novated lease when looking at purchase options.