What Are My Obligations as an Employer for Novated Leasing?
Offering novated leasing as a benefit to your employees is a great way to attract and retain talent. But what does it mean for you as an employer? There are 3 main things you need to do to ensure everything runs smoothly.
1. Administering Payroll Deductions
As part of the novated leasing agreement:
- Salary Packaging: Deduct pre- and post-tax contributions from your employees’ pay. Clear Lease will calculate these for you and guide you through the setup.
- Timely Payments: Forward these contributions to your leasing provider on time to avoid delays in payments for the vehicle and associated running costs.
2. Reporting Fringe Benefits
Novated leasing arrangements include fringe benefits tax (FBT) considerations:
- Accurate Reporting: Calculate and report FBT associated with novated leases to the Australian Taxation Office (ATO). Clear Lease will also provide reporting for you on this.
- Employee Contribution Method (ECM): Work with your leasing provider to minimise FBT liability by incorporating post-tax contributions. Clear Lease manages and educates on this to make it simple.
3. If an Employee Leaves During their Lease
If an employee with a novated lease exits the business:
- Lease Transitioning: The lease can move with them to their new employer, or be converted into a personal arrangement, you'll need to communicate with the provider to ensure the deductions stop and they can manage the transfer correctly.
Team work makes the...
Dream work. Leasing providers like Clear Lease simplify the process for employers with end-to-end administration, keeping the number of obligations, and workload for your Payroll team - super easy:
- Compliance Support: Providers handle legal and tax compliance, so you don’t have to worry about the details. They'll also make FBT and ECM calculations straightforward.
- Administration Assistance: Providers also manage vehicle expenses like fuel, insurance, and maintenance, bundling them into one simple payment.
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Related Questions:
Novated leasing requires minimal effort as long as your provider has a service focus. With automated systems and clear instructions from providers, your payroll team only needs to process a few deductions and maintain basic records.
Yes, employers can claim the GST on lease payments and running costs, helping to reduce BAS liability. This applies if your business is GST-registered and you comply with record-keeping requirements.
The main consideration is the time required for payroll adjustments, but with modern systems and provider support, this is usually minimal. The benefits—like happier employees and potential payroll tax savings—often outweigh any minor drawbacks.
Employers face very minimal liability with novated leasing. An employers role is limited to facilitating salary deductions and transferring payments. The employee assumes full responsibility for the lease.
If your employee leaves, their novated lease will leave with them, as the agreement is between the employee and the leasing provider, with the employer just as a facilitator. The employee can take it to their next employer, or alternative arrangements can be made to suit the situation.