This is a vehicle agreement between three parties. The parties include the owner of the car, the finance company, and the employer. The arrangement is also known as the salary sacrifice or the salary packaging. It is called the salary sacrifice because the owner of the vehicle has to sacrifice part of their income salary to repay the car through the employer. The organization takes care of any agreed cost and other related expenses. This depends on the terms of employment. The employer pays the monthly lease agreement of the car to the finance company by taxing the pre-salary of the owner of the vehicle when they enter into this agreement.
There are two types of the agreement. This includes the fully maintained agreement and the non-fully maintained agreement. Some companies offer only one, but others give the owner a choice to select one. A fully maintained agreement is one where all finance payments and the running costs are included. The non-fully maintained agreement is where the owner of the car takes care of the maintenance and operating expenses.
It is effortless to purchase the vehicle using novated lease because it involves a short process. The buyer selects the vehicle of their choice. They then check the quotation that is provided and confirm if the costs have been included in the running costs and finance payments. The three parties later finalize the agreement. The employer takes care of every cost needed. The car is then delivered to the owner.
A Novated Lease Stratton agreement helps the owner of the vehicle to save the monthly disposable income because the employer is the one who will experience deduction from their monthly salary. It is advantageous than repaying the car using the post-tax salary. The owner eventually saves a lot of money because it is only the income tax that is calculated on the salary. The owner is also in a position to choose the type of vehicle that they wish to drive without any restrictions. They are then allowed to subscribe to the novated lease between the finance car company and the employer.
This also benefits the employee because the car belongs to them. There are no restrictions on who will be driving the car or using it all the time. The Novated lease is also very flexible such that the novation is made between the new employer and the finance company when the employee changes the work of employment. The repayments are also fixed. Any other profit that is realized at the end of the agreement is tax-free. The leasing terms are also flexible. They normally range between one year and five years. This depends on the monthly income salary of the employee.
The Novated lease benefits the employer because there is a significant assistance to their business with less or no cost. The company is held accordingly for any damages on the vehicle. The agreement becomes the balance sheet to the employer whenever the employee loses the job or changes the place of work. This means that the payment is neither an asset nor a liability. It also reduces the employee’s extra costs including the premiums and the payroll tax. The agreement is left to the financier and the owner if they lose a job involuntarily. The owner has the option of paying monthly installments on the car or selling it and covering the remaining amount.
There is a unique formula that is used in the calculation of the fringe benefits of the novated lease. The statutory formula is used. Factors that are usually considered include the base value of the car, the percentage of the regulatory, the total days that the vehicle is used by the owner, the current rates, and the gross up. The salary packaging of the employee is deducted along with the running costs of the car when the fringe benefits are calculated. The kilometers that are covered by the car on a daily basis should be accurate. The individual should find a good leasing company that works in close collaboration with the two parties in order to find the best solutions on how they can manage the cars. The employers should make it easy for the employees to transfer the costs across even if the novated lease still exist.