nlc • novated lease • GST and a novated lease

GST and a Novated Lease

nlc purchases a car and agrees to lease it to you under a lease agreement. The lease agreement is then substituted for a novation agreement and your employer assumes responsibility for the obligations created under the lease agreement.

nlc, as owner of the car and as a company, is able to claim the Goods & Services Tax (GST) payable on the purchase price of the value, as an input tax credit. This means the lease contract will be based on the GST-exclusive purchase price of the car, saving you approximately 1/11th of the total cost of the car up-front (equals 10% GST).

GST and the Residual Value

At the end of the lease agreement, there will be an amount owing on the lease, called a residual value. You can make an offer to purchase the car for the residual value. Because the purchase is a separate transaction to the original leasing of the car, GST is payable on the residual value.

If you choose to re-finance the residual under a new lease agreement, nlc will be able to claim the GST payable on the residual value as an input tax credit. However, GST will be payable on the residual value of the new contract.

GST and Car Running Costs

While the lease is novated, your employer is able to claim the GST payable on the car's running costs as input tax credits. Your employer will pass these tax savings on to you.

If you leave your employer, the novation agreement ceases and the obligations created under the lease agreement revert to you. This means you will be personally responsible for meeting the monthly lease rental and the car's running costs from your after-tax income.

It may be possible for you to novate your lease agreement to your new employer. Until your lease is reassigned you are personally responsible for the obligations created under the lease agreement.

Running costs include:

More Information

If you would like further information on our services please contact us on:

Telephone

03 8699 7000

Freecall

1800 643 044

Email

info@nlc.com.au