A Novated Lease is a three way agreement between the finance provider, the employee and the employer. The employee leases the vehicle directly from finance provider, the employer agrees to make all payments via a deed of novation through the employee's salary package.
Novated lease and running costs of the motor vehicle, and fringe benefits tax (if applicable) are deducted from the employee's pre-tax salary, and PAYG is calculated on the reduced salary or wages.
The tax benefit of a novated lease arises from the confessional fringe benefits tax treatment on the vehicle. Depending on the employee's individual financial circumstances, salary packaging a motor vehicle under a novated lease can have the effect of increasing an employee's net disposal income.
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