It is a 3 way agreement between the Employer, the Employee and the Financier wherein:
The Employee agrees to forgo a portion of their salary to cover the associated cost of the vehicle
The Employer agrees to make payment on behalf of the Employee
The Financier agrees to fund the cost of the vehicle
Novated Leasing was introduced in conjunction with the introduction of FBT to allow employees to sacrifice a portion of the gross salary to cover associated costs with financing and running their vehicle.
As an employer, it has become a valuable tool to allow for employees to allow your staff to access:
Increased Tax Savings
Flexible Vehicle Choice
While simultaneously:
Reducing administrative burden around Company Provided Vehicles
Increasing staff retention due to Novating a Vehicle being an attractive employee benefit
How does a Novated Lease work?
A Novated Lease is simple in nature for the Employer as your partner in Eziway, handles all administration, payments and auditing on behalf of you, the Employer.
The driver of the Novated Lease has additional deductions made from the gross fortnightly salary that will appear on the Salary Packaging Projected Deduction report, that is then sent to Eziway where we make payments and claim reimbursements for the employee.
We manage all FBT implications by way of collecting post-tax to offset FBT or, if allowable via your internal policies, utilise the capped concession to negate the FBT.
Eziway make all finance payments to the financier on behalf of the employee and employer, ensuring all obligations are met.
Where does the risk and responsibility belong?
A common misconception simply by way of the wording around the Deed of Novation is that if the employee cannot make the finance payments, the finance then belongs to the Employer. This is incorrect.
All finance payments are responsible to the employee taking advantage of a Novated Lease. If finance payments are not made, they affect only the employee and have no bearing on the Employer.
What happens if the employee leaves the organisation?
Another common query that arises around Novated Leases is, what happens if the employee with a Novated Lease, opts to leave the organisation?
In the event this does happen, the finance stays with the employee and reverts to a personal loan, as the 3-way agreement is now null and void as the Employer is no longer involved.
If the employee moves to an organisation that allows Novated Leasing, this can be transitioned across, and a new Deed can be signed that involves the new Employer.
What to expect when your staff Novates a vehicle?
When your Employees go through the process of a Novated Lease, the only time you as the Employer is to be involved is for the signing of the Deed of Novation. This occurs right before settlement of the vehicle when all finance applications have been completed, insurance has been taken, final quotes accepted, and vehicle is waiting for delivery.
Once signed and returned to Eziway and the vehicle settles, the new deductions will appear within the Salary Packaging Projected Deduction Report for payroll to make the necessary deductions.
