What Happens if My Employee Leaves During their Novated Lease?
As an employer, novated leasing offers your team a valuable benefit. But a common question arises: What happens if an employee leaves their role while still under a novated lease?
The good news is that novated leasing is designed with flexibility in mind, ensuring minimal disruption for both you and the departing employee. Here’s how the process works and the scenarios you may encounter.
1. The Lease Transfers with the Employee
A novated lease is fully portable. If your employee moves to another company, they can take the lease with them, provided their new employer agrees to a novation arrangement. This ensures continuity and no unexpected costs for your business.
2. The Employee Takes Over the Lease Privately
If the new employer cannot facilitate a novated lease, the employee can transition the lease to a personally managed arrangement. This allows them to continue enjoying their car if their new employer doesn't agree to a Novated Lease benefit.
Your Role as an Employer
As the liability of the Novated Lease falls with the employee, and not you as an employer - your primary responsibility is ensuring the novated lease payments are deducted and remitted during the employee’s tenure. If they leave, our team will guide you through the steps to stop the payments when they leave. Whether the lease transfers or is handled another way, we’ll ensure a seamless transition that protects your business interests.
Why Clear Lease Makes It Easy
At Clear Lease, we understand that employee changes are inevitable. That’s why we provide tailored support for businesses like yours, offering straightforward advice and proactive solutions to manage novated leases when employees move on.
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Related Questions:
Employers need to manage salary deductions, report fringe benefits accurately, and partner with a leasing provider to ensure compliance. The service focus of your leasing provider will determine how much of the administrative tasks are handled by you, vs them.
The next steps will depend on whether employees are staying with the same business entity, or transferring to a new one. The outcome is usually the same though - existing salary packaging agreements can continue with minimal disruption, but will requirement communication with your leasing provider.
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.
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.
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.
A novated lease shifts costs and ownership to the employee, offering tax savings and flexibility, while a company car remains a business asset with full employer responsibility. Learn which option works best for your business on our detailed page.
No, there’s no minimum size. Novated leasing is available for businesses of any size, from sole traders to large corporations.