Pay less tax, save money and drive a better car. All this is possible – with a Novated Lease. So if your employer allows car repayments to be made from your pre-tax salary, it’s time for you to learn how it all works.
Getting started
Your first step towards a Novated Lease is to decide three things:
1. New or used vehicle?
If you are looking for a new car, you can purchase the vehicle yourself – or you can leverage ORIX’s buying power via our national Preferred Dealer Network. If you opt to buy a used car, the car cannot be more than 10 years old or exceed 200,000kms by the end of the lease term.
2. What length lease term do you want?:
Your term can be anywhere from one to five years.
3. Your residual percentage:
The amount owing at the end of your lease will depend on the lease term you choose (according to ATO guidelines).
Choose a quoting method
A Novated Lease can be quoted using three methods:
- Employee Contribution Method
- Statutory Method
- Operating Cost Method.
Most people opt for the Employee Contribution Method. Why? Because it gives you the most benefit if your gross annual salary is $180,000 or less. Check with your employer on what method is available to you.
Setting up your finance and budget
When setting up your finance, it’s important to know that the amount you borrow is equal to the drive away purchase price of your car minus the GST (up to a maximum of $5,234.64).However, if the price of your car exceeds the Luxury Car Tax ($57,581.04) limit set by the ATO, GST will apply to the amount above this limit. Next, you’ll need to set your monthly Novated Lease budget – with our help. Your budget includes running costs such as fuel, maintenance, tyres, registration and insurance. And you won’t pay GST on these costs either. Once again, you can take advantage of our Preferred Dealer Network to receive discounts, such as:
- 35-40% off tyres
- 20-25% off maintenance
- Up to 2-3c off fuel per litre.
And remember: we can help you change your budget at any time throughout your lease – at no cost.
When your car is delivered
Upon delivery, your employer will be advised when the lease starts and the deductions they need to apply to your salary (pre-tax and post-tax).You’ll also receive a fuel card and driver handbook which tells you how to service your car. What’s more, every month you’ll get a driver report that lists your expenditure and car usage from the previous month. (To view your reports, head to ORIX OneView or the ORIX Companion App).
At the end of your lease
When it’s time to end your lease, with a Novated Finance Lease you’ll need to pay the residual amount as stated on your original order form and monthly driver reports. Once we receive your residual payment, we’ll send a reconciled budget to your employer within five business days. Leftover credit will then be taxed through payroll – and any debit will be collected from your next payroll deduction. And if you’re not ready to end the lease? You can extend your term by six months or more. Simply get in touch to find out your maximum extension time.
Ready to learn more? Call us on 1300 363 993 today.
