If you live and work in Australia, you probably are familiar with the concept of a novated lease. Well, it’s safe to bet that you are interested in it, considering that you are interested in what we have to say. For starters, a novated lease is an option of buying and driving a brand-new car while avoiding the usual tax responsibilities. It is different from other commercial car financing products in a way that you can have the vehicle for personal use.
If you are not sure how calculating the novated lease will benefit you, perhaps you first must understand the reasons why people are getting it instead of the usual car loan.
- A novated lease will help in reducing your taxable income.
One great reason to consider a novated lease is that the arrangement allows for salary deductions right before getting taxed. As a result, there’s a reduction in your overall taxable income in every payment you receive. It is an attractive proposition since you no longer will wait for the end of the financial year to claim back the tax.
- You should start calculating the novated lease since it favours you in a way that your employer will make the repayments.
If you want to drive a new car, but you do not like to burden yourself with direct debit payments from your bank accounts every time repayments are due, then you can explore the novated lease option and realise that it is the best alternative out there. What happens is that the employer agrees to make the repayments to the financier before paying your salary. Therefore, you do not worry about the possibility of payments not made.
- You can even save on GST.
When the financing institution calculates the rental payments on the GST exclusive amount of the car of your choice, you must know that you will eventually save on this amount of GST. Since there is GST added to your rental payments and the employer has the right to claim this before giving you your salary sacrificing your lease repayment, you will have the prospect of saving on GST on your car repayments. For the most part, GST savings corresponds to saving on fuel and running costs, including maintenance and tyres.
- It is as convenient as it could get.
One of the best things about leasing a car through the novated system is that you have the option of adding the running and maintenance costs to the lease package. It is no secret that the primary reason why most people think twice about getting a conventional car loan is that aside from covering the monthly payments for the car, they also worry about the fuel, maintenance, and other costs associated with owning a vehicle. While you still must cover those things in a novated lease, the concept adds convenience since you include everything in the lease repayment. In other words, you have fewer things that will cause you to worry.