Victorian Government public servants may lease motor vehicles via a novated lease facility as part of the terms and conditions of the Victorian Public Service Enterprise Agreement 2016.
Employees may enter into a salary packaging arrangement with their employer using pre-tax salary in respect of novated leases for motor vehicles.
All enquiries regarding novated leasing should be directed to the Human Resources or Payroll area within your Department or agency.
What type of vehicle can I lease?
You can select any vehicle you like as long as the value of that vehicle does not exceed the luxury car tax amount (please refer to the ATO website for luxury car tax rates and thresholds).
This amount is reviewed annually by the Australian Tax Office (ATO). In general, the value of a car includes the value of any parts, accessories or attachments supplied with the car or imported at the same time as the car.
You no longer have to purchase an Australian manufactured vehicle.
No. As novated lease vehicles are strictly for private use the government discount rate does not apply.
A novated lease is a special kind of motor vehicle lease that allows employees to operate personal motor vehicles in a tax and cost effective manner when compared with more traditional forms of finance.
Novated refers to an agreement between the employer, the employee and the financier of the vehicle, where the employer agrees to meet the repayments of the finance lease, while the employee remains employed. The employee sacrifices a portion of their salary to cover the cost of the finance and running costs.
A novated lease is an agreement which enables employees to lease a vehicle through a finance company, with the employer facilitating the arrangement by making fortnightly lease payments through the payroll on their behalf.
The arrangement gives the employee’s family full private use of the vehicle. Some agreements provide employees with the option to purchase the vehicle at the end of the lease.
This facility is not available to casual staff.
Under a novated lease, the employer will deduct a portion of the pay for the overall vehicle financing and running costs from the employees’ pre-tax income, and forward it to the leasing company.
This reduces the overall taxable income and reduces the amount of income tax paid by the employee. Other than reasonable payroll costs, employees are to meet all benefit and administrative costs.
Income tax savings are one of the main reasons why an employee elects to novate lease motor vehicles. The portion of expenses that is allowed to be deducted from an employee’s pre-tax salary depends on the value of the vehicle and the amount of kilometres the employee drives.
Every fortnight your employer will deduct the required payment from your pay, prior to calculating your tax, to meet the costs of your novated vehicle lease package and associated employer fringe benefits tax (FBT) costs.
FBT deductions will be retained by the department to meet the annual FBT costs.
You need to ensure you have sufficient funds deducted from your remuneration package to cover the monthly novated vehicle lease and other associated payments made by the novated lease providers on your behalf.
No credit or time extension will be allowed by either your department or the lease provider to meet these costs.
The cost of the lease always remains the responsibility of the lessee, no matter what occurs to the employment status or employment arrangements.
Where the lessee takes unpaid leave, long service leave, recreation leave, maternity leave, sick leave, changes their employment or where their employment is terminated, the lessee is required to continue to meet the costs of the lease payments.
In the case of an employee taking unpaid leave, the lease payments must be met from their own funds, and will not be part of the salary sacrifice arrangement for that period.
The lessee is also required to continue to cover lease payments where a vehicle is stolen or becomes unusable until settlement of any insurance claim, and meet any outstanding amount not covered by the settlement.
You can contact your HR manager or approved lease provider to discuss a sale and lease back on the car you are driving now.
They will advise you how this can be done, which will help you decide if it will be in your best interests.
Employees new to the public service may transfer an existing lease from the previous employer into the VPS novated vehicle leasing facility utilizing one of the pre-qualified novated lease providers.
This provision encompasses both Australian and imported vehicles provided the value is below the luxury car tax threshold.
The vehicle would have to satisfy the age and other requirements specified by the leasing company. The incoming employee must make application through their HR department to seek approval.