Novated leasing employer obligations
See exactly what’s expected of employers offering novated leasing, what falls outside your responsibility and how Leaselab keeps things simple. Your questions, answered.
Key Takeaways: What are an employer’s obligations for a novated lease?
The three key employer obligations are payroll deductions, FBT and the novation agreement. Each is covered in more detail below:
- Payroll deductions: deducting the agreed amounts each pay cycle
- FBT: accounting for the car benefit (which Leaselab can structure to $0!)
- Novation agreement: a short agreement you sign
Your role as an employer, explained
How do payroll deductions work?
Payroll is the one task that recurs every pay cycle, so it’s worth understanding before you start. Once the deductions are entered, they run automatically alongside your normal payroll.
- Each cycle, you deduct the pre-tax amount (the salary sacrifice portion) and any post-tax amount (the employee contribution) from your employee’s pay.
- You pay both to Leaselab
- Payments can be made by direct debit or EFT on the same date as your pay cycle.
We’re all about making integration as easy as possible. That’s why we provide the deduction figures for payroll systems including Xero and MYOB.
What is my role with fringe benefits tax (FBT)?
FBT is paid by the employer on the car benefit, but it’s rarely a cost you carry. Here are a few things to consider with Leaselab:
- Leaselab structures each lease to achieve a $0 FBT position, so there’s usually nothing to pay.
- Your role is to account for FBT when you lodge your return, but Leaselab provides reporting, including reports showing the $0 position, to make that straightforward.
- Your accountant or registered tax agent should review this reporting at lodgement.
What employers are not responsible for
To put it in simple terms, you aren’t responsible for the lease, the finance or the running costs of the vehicle.
- The lease itself: the employee holds the lease.
- The finance: the employee signs the finance agreement and retains liability for it.
- Running costs: fuel, servicing and similar costs are funded through the employee’s lease budget, not by your business.
- The vehicle: the employer isn’t liable for the car.
What happens if an employee leaves?
Your obligation to make payments ends when the employee’s employment ends. The lease stays with them, and they continue paying it or make other arrangements.
Just let us know as soon as possible when an employee leaves.
Do employers have to offer novated leasing?
No. Novated leasing is an optional benefit, so whether to offer it is ultimately up to you. Many employers choose to offer it because it’s a valued perk that employees genuinely appreciate and use every day.
Does it cost the business anything?
No. Offering novated leasing is cost-neutral for your business, and the employee funds the lease from their own salary.
Some providers do charge fees, so check the fee structure before choosing one.
How Leaselab supports employers
Leaselab gives you a dedicated team and the tools to run novated leasing with confidence, without adding to your workload.
- Dedicated relationship manager: A name and number who’s there for fast help whenever you need it.
- Employer Portal: Payroll files and FBT reports in one secure place, so everything is easy to find.
- No exclusivity: Our contracts aren’t exclusive, so you aren’t locked in.
- RewardLab: We also offer an employee rewards app to give your team exclusive partner offers on energy, vehicle chargers, solar and vehicle upgrades.
Let’s talk novated leasing
Book an employer call with our team, and we’ll help you get clarity on your obligations. It’s a simple step towards giving your stellar team a stellar benefit.
FAQs
Do I have to pay anything to offer novated leasing?
No. Offering novated leasing is cost-neutral for your business. Check any provider’s fee structure before you sign.
Am I responsible if the employee’s car is damaged or they stop paying the lease?
The employee signs the finance agreement and retains liability for the lease.
Can I stop offering novated leasing to an employee partway through the lease?
This depends on your employment arrangements and the lease terms, so speak with your accountant or adviser and your provider before making any change.
What if I’m a sole trader?
Novated leasing is designed for employees paid through payroll, so you’ll need to be a PAYG employee to access it. If you’re a sole trader, you can still be eligible if you pay yourself a wage through payroll. If you want to see how this could work, chat with a financial adviser and see your estimated repayments on our novated lease calculator.
