Can a Sole Trader Do a Novated Lease?

Sole traders in Australia often face challenges when it comes to obtaining a novated lease. The reason lies in the fundamental structure of a novated lease, which typically requires an employer-employee relationship. A novated lease involves three parties: the employer, the employee, and the leasing company. The employer makes payments on behalf of the employee, which simplifies the process and allows the employee to enjoy tax savings by salary packaging the vehicle costs.

Unfortunately, since sole traders do not have an employer to facilitate this arrangement, they are generally ineligible for traditional novated leases. However, there are alternative paths available depending on your business structure and how you pay yourself.

Eligibility for Sole Traders Using a Company Structure

If you are a sole trader but operate through a company structure and pay yourself a wage, you might still qualify for a novated lease. In this case, your company functions as the "employer" in the lease arrangement. To apply, you would need to provide sufficient financial documentation, such as bank statements and tax returns, to verify your income. This route can be viable, but the process tends to be more complicated compared to standard novated leases for employees.

Alternative Leasing Options

For most sole traders, alternative leasing options may be more suitable. Business leases or personal leases, which do not require an employer to manage payments, are popular alternatives. These options allow sole traders to secure a vehicle for business purposes without the restrictions of a novated lease. However, lenders typically require proof of consistent income, identification documents, recent bank statements, and trading accounts.

Key Considerations

Whether opting for a business or personal lease, the most critical factor for sole traders is income verification. Being able to demonstrate stable and verifiable income is essential to secure financing. Additionally, having well-organised financial documentation will increase your chances of approval.

Conclusion

In summary, while sole traders generally cannot access traditional novated leases due to the employer-employee requirement, those using a company structure and paying themselves a wage may still have options. For others, exploring alternative leases is often the best route.

Want to explore leasing options tailored to your business needs? Contact us today to find the best vehicle financing solution for your situation.