Sacrifice Your Salary With A Novated Lease

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Every Aussie is familiar with the pure awesomeness of a novated lease. While not every employer offers such a benefit to their employees, job seekers typically prefer openings in which the novated lease is part of the gig.

For those that aren’t familiar with a novated lease agreement or sacrificing one’s salary, the major benefit – and the term “salary sacrifice” – comes from tax benefits associated with any novated lease.

Rather than trying to explain first in English, let’s touch on two hypothetical examples that involve Stratton Finance Novated Lease vehicles. The first does not include a novated lease; the second one does.

Example Number One

Jimmy gets paid $50,000 AUD each year. After tax, he takes home $42,203. Let’s say he wants to lease a vehicle. He finds that vehicle, a Suzuki Celerio, for a list price of $13,000. Let’s assume he pays it off in one year. Oh wait – taxes. GST is 10 percent, so that’s now $14,300.

So, after the year’s over, Jimmy ends up with a new-to-him car, and about $27,903. But wait! What about gas, repairs, maintenance, and all that good stuff?

If Jimmy drives an average 15,000 kilometers that year, he can expect to fork over slightly more than $5,000 – about $5,572. So, all considered, Jimmy goes home with roughly $22,330 at year’s end.

Example Number Two – She’s Smarter Than Jimmy

Amber gets paid $50,000 AUD annually, as well. Before we take out tax, since this lady is much smarter than Jimmy, let’s consider the cost of a lease.

She gets the same car for $13,000, spread across one year’s time. She doesn’t pay tax on that $13,000 Mazda Finance Stratton loan thanks to the novated lease she’s privy to. $37,000 is now her taxable income.

Hold up! Because all vehicle expenses are included in a novated lease agreement tax-free, let’s calculate that first. $37,000 – $5,066 = $31,934. There’s our pre-tax pay. Well, Amber’s pre-tax income, not ours, because she was smart enough to choose the novated lease.

$29,324 is what Amber has at the end of the year. Compared to Jimmy’s relatively paltry $22,330.

What Else Is A Novated Lease Good For?

Because employees have the financial power of their employers on their side, workers can feel safer about getting a vehicle to drive through their employers, rather than doing so on their own.

At the end of novated lease agreements, there are tons of options, ranging from not picking up any option, to rolling over one’s residual and leasing a much better car.