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Novated leases could be a company’s competitive advantage

By Jack Campbell | |4 minute read
Novated Leases Could Be A Company S Competitive Advantage

Novated leases can be a great way for employees to cut costs by saving money on tax for vehicles. New data has suggested that it can also be beneficial for employers looking to attract and retain skilled workers.


A novated lease is an agreement in which an employee enters with a finance company where they select a vehicle to lease, and the employer handles the necessary repayments.

The employer can then deduct lease payments, fuel, maintenance, and insurance from an employee’s pre-tax salary. This reduces their taxable income, resulting in potential savings.

This can prove to be a win-win. For employees, money can be saved on taxes, which is especially helpful during the current cost-of-living crisis.

For employers, offering these incentives can help drive performance. In fact, according to a recent Metro Finance study, 70 per cent of businesses believe novated leases can boost talent attraction and retention.

Metro Finance’s chief executive, Phillip Crossman, commented on the results: “While pay packages are the most common way to leverage talent, this measure obviously has its limitations. Novated leasing is an attractive and cost-effective remuneration component that can be offered by employers.”

Despite the benefits, a large portion of employers are unaware of novated leasing, as 60 per cent of respondents had little or no knowledge of it.

Meanwhile, 42 per cent of respondents believe it is a company car lease, where the company is responsible for making payments, and 18 per cent thought it was a long-term business car rental, with the driver responsible for making the rental payments. Just 40 per cent chose the correct answer.

“Not everyone knows about it or understands the terms of a novated lease. This is an underutilised strategy for HR departments and business owners all over Australia. The employee can save on their car repayments and associated running costs, and the company can offer a compelling new remuneration component that will assist in retaining existing staff and attracting new staff,” Crossman said.

“Government-backed electric vehicle subsidies have helped get the EV movement off the ground, and now, governments are getting serious about increasing charging stations to deal with the consumer barrier of range ‘anxiety’. The strategy is well placed and demonstrates the important role of subsidies in encouraging the uptake of electric vehicles and the provision of related charging infrastructure. We expect the novated lease industry to continue its growth with this support, which underpins the important role of the salary packager in promoting this initiative.”

Jack Campbell

Jack Campbell

Jack is the editor at HR Leader.