Remunerator News

Aug 10 2018

How a Candidate’s existing Novated Lease can make your Salary offer instantly more competitive

There is a common misconception that it’s difficult for employees to change jobs with a novated lease. While offering novated leasing and salary packaging programs helps to increase employee retention, people do move on to other opportunities.

When an employee takes out a novated lease on a new car, the FBT value is calculated essentially on the value of the car when it is first included in the salary package (for new cars it is essentially the purchase price).

However, if the employee moves to a different employer, there is a new salary packaging arrangement established so the car is revalued to the then current value of the car as “the value of the car when it is first included in the salary package”.

The car value can be taken as the trade-in value of the car. Given FBT is based on this value, it reduces the FBT payable on the lease.

As the new employer, you can offer the employee to bring over the existing novated lease and it will cost less in the salary package. This instantly gives a more competitive offering!

How is the FBT value reduced on a novated lease?

For example, an employee takes out a 4 year lease on a $40,000 car and changes employers 2 years later. The FBT charge on the car at the first employer would be $8,000 per annum using the statutory method.

When the employee begins their new job, the car must be revalued to set up the new salary packaging arrangements.

Since the FBT is calculated based on the current value of the car, if the car value has dropped since the beginning of the original lease to $18,000, the FBT owing will be less – in this case $3,600 per annum. On a like-for-like basis, the employee has gained $4,400 per annum.

Speak to us today about offering your current and future employees a novated leasing program. Contact us for more information here.