If you are dreaming to have a car but after paying income tax you do not have enough amount to pay your monthly installment, there is another way to fulfill this dream of having a luxury or normal car. You have the option to pay for it on installment basis, deducting the cost from your full salary. In turn, you’ll have to pay less tax because of your reduced salary. Part of your salary can also go to your vehicle’s upkeep/maintenance. This cost-effective option is considered as a Novated lease.
How do novated leases work?
You need to know how do novated leases work? Novated lease is an agreement among three parties, your employer, you and a company which makes finance. In this process the employee simply chooses a car, and employer pays the monthly installments for your car and you make your payment after decreasing the amount of installment. By which you have to pay the tax of only on that amount which you get after the installment paid. Installment is directly paid by your employer to the finance company. There are some more benefits you may avail from this. After financing a car you would definitely drive it. When you will drive a car, it would also require its maintenance and fuel; you can also avail the facility of making payments for these things and then got your salary so you would not have to pay tax on that amount which you spend on maintenance and fuel. Thus, you can save tax on that amount too. If you finance a car without Novated lease it will not be a beneficial decision for you.