Here at Alliance Leasing, we help both employers and employees get ahead financially when it comes to buying vehicles. The novated lease process has a number of benefits for all parties, and it’s by no means a small industry. IBISWorld indicates that overall, the fleet leasing sector will be worth about $2.4 billion by the end of 2015-2016.
But what are the specific benefits of a novated lease? Well, here are a couple of the basics to get you started if you’re an employer looking at providing novated leasing to your employees.
Goods and services tax (GST) is like sand: it gets everywhere. But when you and your employees engage in a novated lease arrangement with a novated lease company, there can be excellent benefits for you as an employer. As the Australian Taxation Office (ATO) points out, if you’re leasing a vehicle “in the course of carrying out your business”, then the GST on the lease arrangement can be claimed as a credit.
By claiming GST you can minimise some of the costs associated with company-owned or fleet vehicles, improve cash flow and give your employees a 10 per cent discount on all running costs – at no cost to your company.
Pay less tax
Under a novated lease, you (the employer) will make payments for the vehicle and running costs directly from the employee’s payroll. This reduces the employee’s taxable income, and means they pay less tax at zero cost to you!
You could reduce your payroll tax and worker compensation costs.
If you’re managing a large to mid-size employee base, novated leasing can greatly reduce the amount of tax you will deal with on regular basis and potentially save your company thousands. Allowing your employees to take advantage of a novated lease not only effectively gives them a pay rise, but could also reduce your workers compensations and payroll tax liabilities as their reportable taxable salaries have decreased.
Additionally, the employer involved in a novated lease arrangement has to meet fringe benefit tax (FBT) requirements. With an Alliance Leasing novated lease, employers can rest assured that there will be no FBT liability. We structure all leases in such a way that this liability is offset by the employee and any risk is mitigated to zero.
Picking apart the full range of bonuses that novated leasing can bring for employers takes a bit of time, but that’s what we’re here for. Get in touch and we can answer any questions you might have about the process.