In 2014, more than one in every five cars sold in Australia was bought using novated leasing, which shows that this way of getting and paying for a car is becoming more popular. In Australia, employees can get a Tesla through a novated lease, which lets them drive an electric card and save money on taxes at the same time.
Any employee can salary package their car. Novated leasing is not for wealthy individuals 70% of novated lease users earn less than $100,000. The most common users are charity workers, nurses, police, teachers, and civil servants.
Understanding Novated Leases in Australia
A Tesla novated lease offers Australian workers a Tesla while helping them with significant tax savings and flexibility.
What is a Tesla Novated Lease?
It’s a salary packaging arrangement where you lease an electric vehicle through your job. Your employer takes the lease payments and other car costs of your salary before taxes. This novated lease some advantages for you:
- You can save on taxes: Since you are paying for your electric car before taxes, you pay less. This makes your Tesla more affordable than purchasing the vehicle outright.
- You can choose the car you prefer: By signing up through a novated lease, you can pick any Tesla model that suits your needs and preferences.
- It reduces administrative burden: Your employer doesn’t have to worry about the maintenance or disposal of the car, as the novated lease is your arrangement.
- Potential saving on electric cars: The Australian government doesn’t charge Fringe Benefits Tax (FBT) on electric vehicles under a certain price, saving you thousands of dollars each year.
Tesla has been a leading manufacturer of electric vehicles since 2003. They design, develop, manufacture, and sell a range of EVs like sedans, trucks, and SUVs.
In Australia, Tesla has established a strong presence with its popular models, such as the Model 3, Model Y, Model S, and Model X. These EVs offer advanced features, impressive performance, and a long drive range on one charge.
Tesla makes many parts of its cars in-house, including the motors and batteries, which allows it to maintain a competitive edge in the EV market. Tesla’s commitment to innovation and sustainability has made it a preferred choice for Australian customers looking to embrace electric mobility.
How Does a Tesla Novated Lease Work?
A Tesla novated lease is a three-way arrangement between you, your employer, and your finance company. Here’s how it works from the perspective of employer and employee:
Employees Perspective
You can start by choosing the Tesla model you prefer as an employee. You then apply for the lease through a provider your company works with. Once you approve, the lease payments and associated running costs will be deducted from your pre-tax salary. This means you are paying for your car with money that hasn’t been taxed yet, which can lead you to save thousands of dollars.
Employers Role
Setting up a novated lease program involves some work for your employer. They need to set up a program with a provider with your company so that employees can enjoy this benefit and deduct the payments from their pre-tax salary.
They will also handle paperwork to ensure employees sign and coordinate the necessary documentation with the novated lease provider. In addition, they need to check whether your novated lease complies with relevant tax and employment regulations, which will be reported to the Australian Taxation Office (ATO).
What Are the Benefits of a Tesla Novated Lease?
A Tesla novated lease is a smart way for Australian workers to drive an electric vehicle while saving money on taxes and simplifying car ownership.
1. Tax Savings
This is the primary benefit of a novated lease: it helps you pay less tax. Deducting the car payments and running costs from your pre-tax salary can reduce your taxable income, saving you thousands of dollars. It also makes owning an electric vehicle cheaper than buying one outright.
2. Inclusive Running Costs
The novated lease covers more than just the car. It also includes a range of expenses like insurance, registration, servicing, and roadside assistance.
3. Flexibility on Customisation
Novated leases offer flexibility in terms of how long you want the lease, and you also get to choose which Tesla model you prefer. You can customise optional extras or accessories to suit your electric vehicle’s aesthetic.
4. FBT EV Rule
The Australian government doesn’t charge a Fringe Benefits Tax on electric vehicles under a certain price, which means you can save even more when you choose Tesla.
Eligibility and Requirements
Novated leasing offers Australians a way to finance their dream electric vehicle, but it is important to understand the requirements, qualifications, and financial implications before getting one.
- Employee eligibility: Your employment is essential to qualify for a novated lease. Full-time employees are the preferred candidates, but part-timers are also eligible if they have stable income. Casual workers get approved if they work steadily and meet income rules. Self-employed people can apply, but it takes longer to prove their income with extra paperwork.
- Financial health: A good credit score and low debt-to-income ratio are important because lenders will consider whether you are in a strong position to meet lease obligations.
- Employer approval: Getting your employer’s approval before planning to get a novated lease is crucial. They can help you obtain the salary packaging policy that allows for novated leasing.
- Tesla vehicle requirements: If you’re getting a Tesla vehicle, there are a few requirements you must take note of. The car should be less than eight years old at the end of the lease term and must be used for work-related purposes rather than just personal use. The maximum value of the vehicle that is eligible for a novated lease may be restricted.
- Financial aspects of novated leases: The estimated residual value at the end of the lease is a key factor in determining the monthly payments. Like Tesla, vehicles with a higher residual value may result in lower monthly lease costs.
Comparison with other financing options
Novated lease offers some benefits compared to traditional car loans. Through a novated lease, you can pay from your pre-tax income, which lowers your taxable income. It covers costs like maintenance, insurance, and fuel in a single monthly payment.
You can choose your card and upgrade it when the lease ends. But if you lose your job, you’re still responsible for the lease without the tax benefit.
When you buy the car outright, you can own it immediately but must pay the full price upfront, including GST. You will miss out on the tax benefits a novated lease can offer since you’re using after-tax money.
Considerations and Potential Drawbacks
While a novated lease for Tesla models offers benefits, there are also some considerations to consider:
Financial Commitment
A novated lease usually lasts 3-5 years, a long time to be tied to a car payment. If your life changes and you need to end the lease early, it will cost you a lot of money.
Usage Restrictions
Novated lease agreements often limit the vehicle’s usage and mileage allowances to prevent the car’s value from dropping too fast.
Employer Dependence
Your novated lease is connected to your job, so if you leave it or get fired, the lease becomes your problem. If you are still determining your job stability, you might lose the tax benefits and have to pay fees to end the lease early.
Summing up
Novated leases made Tesla ownership more accessible to a wider range of Australian workers. This method helps employees save on taxes and simplify their car expenses.
This innovation is good for working individuals and is also helping the country adopt more electric vehicles. As more people choose Teslas through novated leases, Australia will move towards a more sustainable transportation future.
A Tesla novated lease offers the best of both worlds. You can enjoy driving a high-tech, environmentally friendly electric vehicle while making a smart financial choice. It’s one of the best ways to experience the future of driving without going overboard with your budget.
Image Source:
https://www.pexels.com/photo/tesla-model-s-75d-2015-price-59-900-28123194/