Most of us have at least heard about novated leases, especially with all the fuss last year about the proposed changes to the system, which were promptly scrapped again. However, for some of us, we may be holding back from agreeing to this form of salary packaging because we’re believing some of the very common myths about novated leases for cars.
Myth 1: You have to earn a huge salary to be able to afford the repayments.
While the most noticeable novated leases (and cars bought on a novated lease scheme) are the ones that involve the latest and best luxury vehicles, this isn’t always the case. You don’t have to be in the top tax bracket to benefit from a novated lease and you don’t have to purchase a fancy new car through this system easier. In fact, a novated lease agreement can keep you in a lower tax bracket while still getting rewarded by your employer for a job well done. And you can get any sort of car under a novated lease scheme, as long as you can afford the repayments just like you would with a personal car loan. However, there are some limits on the age of car that you can get you can’t get a really old banger. But would you really want to?
Myth 2: You have to travel heaps of kilometres to really benefit from a novated lease.
One of the issues with the proposed FBT tax changes last year was to do with the keeping of logbooks to keep track of your kilometres travelled. Some may have thought that you had to be on the road just about all day every day before you could benefit from a novated lease. This isn’t the case you can reap the benefits even if you just use your car for the daily commute (and we all use our cars for way more than that). In fact, if you travelled all day every day for work purposes, the chances are that you’d be issued with a company car anyway.
Myth 3: You have to be using the car for work purposes to get a novated lease.
Under a novated lease scheme, you can use the car for business purposes or personal purposes or you could even just leave it sitting parked in the driveway to impress the neighbours. It’s like taking out a personal loan for a vehicle except that your repayments are taken out of your pay packet before your boss gives it to you rather than afterwards meaning that you have less income tax to pay (OK, there’s fringe benefit tax, but that’s another story ask us if you’re not sure about how this works). Once you’ve got the car, you can do what you like with it.
Myth 4: You don’t need to insure a vehicle that’s under a novated lease.
Don’t be fooled! Like any other car, you will need to make sure that it’s properly insured so that you’re covered when you’re on the road.
Myth 5: Your employer gets to pick the sort of car you get under a novated lease scheme
The choice of car is up to you, as long as the repayments are manageable and the car is under a certain age (usually 8 years). After all, you know your personal needs in the way of a vehicle better than your boss does.