Novated leases are a very popular way for employers to reward their best staff members. It’s such a part of Australian business culture that attempts to change the system a couple of years ago created a very big stir indeed.
If you are an employer, it’s not compulsory to offer your workers a novated lease as part of their salary package. However, it’s an option you might want to consider. But when is it a smart option for you to offer this sort of deal?
It’s time to ask yourself a few questions to help you make this decision.
- Is he/she a worker who deserves some sort of reward? If yes, then you can go to the next question. Obviously, a drone who shows up late, leaves early and spends loads of time hanging around the water cooler gossiping, or even if their performance is only mediocre, you probably shouldn’t reward them.
- Have you spent a lot of time training this employee and/or do you feel that you’d be lost without him/her? Setting up a novated lease encourages your office Superman/Superwoman to stay with you rather than transferring to another job. They won’t just stay because you’ve been nice; they’ll also hang around so their car repayments will be taken out of their pay packet before tax rather than afterwards.
- Does your employee do a moderate amount of work-related travel? Here, things get a bitYou may or may not encourage use of the logbook system when setting up a novated lease with your employee. However, if your employee does loads and loads of work-related trips, he or she will probably not benefit all that much from a novated lease and may not consider it to be much of a reward. You may want to consider leasing a company car that they use for work purposes only, although this will depend on the size of your business and the nature of your work.
- Do you have a fairly tight budget? Novated leases are a real boon to not-for-profit organisations or businesses with tight margins, as there’s no overhead cost to theYou may not be able to give your employees a raise to reward them if the funds aren’t there but you can set up a novated lease for them instead.
- Do you want your employees to do some work-related driving but want to save hassles and paperwork regarding assets and liabilities? A car financed through a novated lease scheme doesn’t count as an asset or a liability for you and your company, meaning that you can leave these vehicles off the balance sheet.
- Do you want to claim an extra input tax credit? Of course you do every little tax credit helps! You get to claim an input tax credit on any GST paid as part of a novated
Of course, setting up a novated lease for your employees has lots of ins and outs, and you probably have other questions you want to ask about the process. But that’s what we’re here for ask us whatever you like!