Why data backup is important for your business
Backing up your business data is crucial to the running and the continuity of your business operations, but it is often overlooked. In simple terms,…
What is a Novated Lease?
(And what happens if the staff member leaves?)
A novated lease is a type of car lease arrangement in which an individual (the “lessee”) transfers their lease obligation to their employer. The employer then becomes responsible for making the lease payments on behalf of the employee and assumes ownership of the vehicle. The purpose of a novated lease is to allow the employee to receive the benefits of a company car while maintaining the tax benefits that come with a lease agreement.
Under a novated lease, the employee’s salary is reduced to reflect the cost of the lease payments, and the employer takes over responsibility for the lease payments. This can provide significant tax savings for the employee, as the lease payments are paid from pre-tax salary, and the cost of running the vehicle can be claimed as a tax deduction for the employer. In addition, the employee can receive a fully maintained vehicle with all running costs, such as fuel and insurance, included in the lease payments.
It’s important to note that novated leases are only available to employees and are typically only offered by larger companies or organizations. Additionally, the employee must have the approval of their employer to enter into a novated lease, and the employer must agree to assume the obligations of the lease. It’s also important to carefully consider the terms of the lease and to seek professional advice before entering into a novated lease agreement.
What happens if they stop working for the company?
If an employee stops working for a company that has assumed their novated lease, there are a few potential outcomes depending on the terms of the lease agreement and the circumstances of the termination of employment.
One option is for the employee to take over the lease and continue to make payments themselves, which may involve paying out the balance of the lease. Another option is for the employee to return the vehicle to the leasing company and end the lease agreement. In some cases, the employer may agree to assume the lease payments and continue to maintain the vehicle for the remaining term of the lease.
If the employee’s employment is terminated due to redundancy, they may be able to transfer the novated lease to their new employer, provided that the new employer is willing to accept the terms of the lease and assume responsibility for the payments. If the new employer is not willing to assume the lease, the employee may need to take over the lease payments themselves or return the vehicle.
The outcome of a novated lease when an employee stops working for the company will depend on the terms of the lease agreement and the specific circumstances of the termination of employment.
It’s important for the employee to carefully consider the potential outcomes and seek professional advice before entering into a novated lease agreement.