A novated lease is a great way to buy a car and get tax benefits simultaneously

It’s an innovative concept, unique to Australia, which draws together you–the soon-to-be car owner–your employer, and the financial service provider, to help you buy a car. The process is simple, and the tax benefits make getting a novated lease more appealing.

Now all you need to do before you take the leap and apply is figure out whether you are eligible for a novated lease. You’ll be glad to know that novated leases have been designed to ensure that just about everyone is eligible for one.

Do I qualify for a novated lease?

There are four simple prerequisites which need to be met if you are to take out a novated lease on a car. These requirements are simple, making it more straightforward for you to get a tax break when buying a car.

  • You must be permanently employed

Whether you are employed full time or part-time, you are eligible for a novated lease. However, if you are a casual employee, you are not eligible because your salary may fluctuate.

  • You pay tax

The most enticing aspect of a novated lease is that you can save money by reducing the amount of income tax and GST you pay. With salary packaging, your car’s monthly cost is deducted before your tax is deducted, thereby decreasing the amount of income tax you pay and increasing your take-home salary.

  • You must have completed your probation period

When you start a new job, there is a probation period you have to complete in order to secure your position within the company. Only once you have completed this period of your employment, you should be then eligible for a novated lease. Although, some lenders will approve someone still in probation, so long as there is industry/role continuity and as long as your employer allows you and signs the Deed of novation.

  • Your employer must offer salary packaging

Because a novated lease is a contract between you, your employer, and the financier, without your employer’s approval you will not be eligible for a novated lease. Some companies just don’t offer salary packaging. Companies which do will discuss their salary packaging policies and help you get a novated lease.

Myths about novated lease eligibility

There really are so few prerequisites to getting a novated lease, you would be forgiven for thinking there’s a catch. Here are a few myths about novated lease eligibility which you may have believed to be true:

  • It must be a new car – you can buy a second-hand car which isn’t over a certain age.
  • You must earn a lot – even people who fall into middle to lower-income brackets can get a novated lease.
  • You must use your car for work – you do not have to use your vehicle exclusively for work to reap the tax benefits of a novated lease.
  • You must record a lot of annual mileage – you don’t have to do a lot of mileage to qualify for a novated lease. You can also lower your monthly payments if you incur less mileage.

If you are considering applying for a novated lease, get in touch with us. The Fingo team is happy to answer your questions and help you get a novated lease.

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If unsure, the average is 20,000 KMs.
If unsure, the average is 3 years.
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