Can a Director Have a Novated Lease?

Yes, a director can have a novated lease, provided they meet specific eligibility criteria. Novated leasing is an effective way for employees, including directors, to finance a vehicle through salary sacrifice, reducing their taxable income. However, there are certain conditions that must be met for a director to qualify for this arrangement.

Eligibility for a Novated Lease

PAYG Requirement:
To be eligible for a novated lease, the director must be paid through the Pay As You Go (PAYG) salary system. If the director is drawing a regular salary as an employee of the company, they can take advantage of a novated lease. However, if they are only receiving directors' fees without being classified as an employee, they may not be eligible for this type of arrangement.

Employer Approval:
A novated lease involves salary sacrifice, meaning that lease payments are deducted from pre-tax income. As a result, the company, acting as the employer, must approve and facilitate this arrangement. Therefore, it is essential for the director to ensure that their company is willing to offer a novated lease as part of their benefits package.

Benefits of Novated Leasing for Directors

Tax Efficiency:
By opting for a novated lease, directors can reduce their taxable income through salary sacrifice, leading to significant tax savings. This can be especially beneficial for those in higher tax brackets, as it reduces the overall taxable salary.

Vehicle Flexibility:
Directors have the flexibility to choose new or used vehicles. Additionally, there is the option to finance an existing vehicle through a sale-and-leaseback arrangement. This flexibility makes novated leasing an appealing option for directors looking to finance their next vehicle.

Conclusion

In summary, directors can participate in a novated lease if they are classified as PAYG employees and their company agrees to offer this benefit. The arrangement provides tax advantages while offering flexibility in vehicle choice, making it an excellent option for directors seeking a cost-effective way to manage their vehicle expenses.

Interested in a novated lease as a director? Contact us today to learn how we can help you set up a tax-efficient leasing arrangement that works for you and your company.