Novated Lease

In Australia, many employers offer car incentives such as hired cars as part of the salary package to employees. Employers, who offer hired cars as part of the salary package, usually opt for a Novated Lease Agreement that is a three way agreement between the employer, the car lease company and the employee. In this type of agreement the employee is given a car to use by the lease company and the employer pays for the car from the employee’s salary package.

Buyers in Australia can opt for one of the three types of Novated lease agreements. The first type of agreement, known as the Novated Finance Lease agreement required the employee to pay GST and residual payments. The second type of agreement, known as the Novated Operating Lease agreement, requires the employee to return the car in a good condition with an agreed number of used kilometres. Once the employee returns the car to the lease company, the company then becomes responsible for GST and residual payments.

The third type of agreement known as the Fully Maintained Novated Lease requires a fleet management company to include various maintenance costs in the package such as petrol, car insurance and other maintenance costs. The fleet management company then packages all these expenses into a monthly car lease payment and collects these payments from the employer at the end of the month. Buyers who opt for Novated Lease agreements can enjoy various benefits such as lower Fringe Benefit Taxes and fixed interest rates while hiring rental cars.