Does My Business Need a Minimum Size for Novated Leasing?
A common question we hear from business owners is: Do I need a certain number of employees to offer novated leasing?
The answer is simple—no. Novated leasing is incredibly flexible and accessible, regardless of your business size. Here’s how it can work for any company, whether you’re just starting out or managing a large team.
1. Sole Traders
The short answer is Novated Leasing is available for Sole Traders, but it is more nuanced, and can be a little more complicated to setup initially than with larger businesses, depending on how the business is currently structured.
This is because a novated lease technically requires an 'employer-employee' relationship, with income coming through a company or trust.
So, to have a novated lease as a sole trader, you'll need to operate through a company structure, and be paid a wage through a company that acts as your employer. This will need to be verifiable through financial documentation like income statements and tax returns.
2. Small & Medium Businesses
If you have a small, medium, or growing team - novated leasing is an excellent way to access tax benefits and provide a compelling perk for your employees. The arrangement is scaled to your needs, ensuring a straightforward process without unnecessary complexity.
3. Large Corporations
For large organisations, Clear Lease novated leasing integrates seamlessly with payroll systems and employee benefits programs. We provide customised support, and work with your HR and Payroll departments to create a balanced policy and process to ensure your team enjoys a smooth, scalable plan tailored to your operational needs.
Why There’s No Minimum Business Size
The portability and flexibility of novated leasing means it can suit any business structure. The only caveat being it does require a business structure and 'employer'.
Whether you’re an individual operator or managing a large workforce, the benefits of novated leasing—like tax efficiency, employee satisfaction, and reduced administration—remain accessible.
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Related Questions:
Self-employed individuals can access novated leasing if they pay themselves a salary through a business structure like a company or trust. For sole traders, a shift to a company structure, or alternative leasing options will be better suited.
Novated leasing used to only make sense for high earners. Thanks to modern tax rules and the ECM method, any employee earning over $40,000 can save on tax and running costs—no matter their car or driving habits.
FBT is a tax (with a rate at 47%) applied to fringe benefits (incentives beyond salary/wages received from an employer). A non-electric car under a novated lease is a fringe benefit (electric cars are completely FBT exempt in Australia).
The employer is responsible for paying the FBT, but at Clear Lease - we use the employee contribution method (contributing post-tax funds) to offset any FBT to zero.
This works because we can tax deduct any expenses incurred in the arrangement and maintenance of a vehicle as a fringe benefit. We work out the right mix of pre-tax and post-tax payments the employee needs to make to make sure the FBT liability is negligible for the employer.