We often get clients ask us which type of lease is better, a Novated Lease or an Associate Lease? The simple answer to that question is “it depends”. It depends on your financial and personal situation.
A perfect example just occurred recently when I had to run through this exercise with a potential client. He was interested in both an associate lease and Novated Lease, but more importantly he wanted to know which one would be more beneficial to him. After running through both options with him he was amazed at how a model such as an associate lease will suit him better compared to a novated lease.
The easiest way to explain the differences between an associate lease and novated lease is as follows;
An associate lease is an agreement which is taken out between the employee and their associate with the approval of the Employer (Your Partner or family members over the age of 18).
The Associate rents their vehicle to the person who is salary packaging. The objective is to get the benefits of Salary Packaging and the associate get the opportunity to write off the vehicle against their tax by claiming the depreciation of the vehicle and if there is a loan they also get to claim the interest. (Associate Lease works well if the Associate earns under $35,000 per year due to the tax benefits that are available.) We recommend that you check with your accountant before proceeding.
The way I had it explained to me is:
– An Associate Lease essentially means you are your own bank. (You finance the vehicle through your own assets. I.e. redraw on your home loan), or you may already own the vehicle or pay cash for it.
– A Novated lease on the other hand is financed via a third party (bank or financial institution).
So if you have the facility to finance your own vehicle in your associates name then an associate lease will be the right way to go. If this cannot be achieved then the Novation is better for you.
If you have a vehicle without a loan, then the Associate may possibly be better option for you. If you plan on buying a new car then in most cases the Novated Lease will be better for you. Both options could be beneficial for you depending on your personal circumstances. At JBS Salary Packaging, we will provide you with the best possible outcome that puts more money in your pocket that is for sure.
Benefits for the employer
It makes sense that all employers take advantage of Salary Packaging as they too benefit as the GST paid by the employees is passed to them in a way of the employer claiming this against their BAS Statements, assisting in reducing the employer’s tax liability as well.
Remember to always discuss your options with one of the team at JBS Salary Packaging to ensure it’s the right decision for you and seek professional advice!
