Question 1

What is a novated lease?

Accepted Answer

A novated lease occurs when you enter into a lease to purchase a car and then novate, or transfer, the lease to your employer. When you purchase a car through a novated lease, your employer pays for everything and takes the cost out of your pay.

Question 2

How can I save with a novated lease?

Accepted Answer

With a novated lease, your finance costs come out of your pre-tax salary thus reducing your overall income and minimising the amount of tax you'll pay. Your vehicle finance and all its running costs are also bundled into a single payment, saving you money. And you'll save **GST** on the price of your car and ongoing costs.

Question 3

What are the benefits of a novated lease?

Accepted Answer

1. Novated leases are paid in pre-tax dollars from your income so that **PAYG tax** is reduced.
2. Once a lease is novated to an employer, **GST** can be claimed and returned to you. This includes GST on the price of the car, and GST incurred in the running and operating of the car.
3. Once a lease is novated to an employer, any **fringe benefits tax (FBT)** is reduced to zero by the use of a post-tax contribution, this is known as the **Employee Contribution Method (ECM)**.
4. Ongoing car costs and expenses are combined into one salary deduction amount for the life of the lease.
5. Cars purchased using a novated lease are purchased at **fleet pricing** with reductions not usually available to you.
6. When the lease ends, any profit made over and above the residual value, as determined by the ATO is **tax-free** to you.

Question 4

Why do employers offer novated leases to employees?

Accepted Answer

Given that novated leases offer **tax savings** and **cost benefits**, offering novated leasing can make an employer more attractive to employees.

Question 5

What is a novated lease program?

Accepted Answer

For an employee to gain a novated lease, the employer needs to implement a novated lease program.

A **fully maintained novated lease** includes management of all car running and operating costs, including:
- Finance costs
- Fuel
- Insurance and registration (including comprehensive, optional GAP cover and redundancy lease protection)
- Maintenance and service costs
- Tyres and windscreens
- Pre- and post-tax calculation to reduce fringe benefits tax (FBT)
- Management of GST claims
- Compliant and accurate FBT management and reporting
- A seamless payroll interface
- Extended warranties
- Car wash and detailing
- Roadside assistance
- Management and administration fees

Question 6

What cars can I purchase under a novated lease?

Accepted Answer

At Inside Edge, we offer flexibility and choice to ensure you get a car that suits your preferences, lifestyle and budget.

This can include:
- New cars
- Used cars with a market value of more than $10,000 and generally not older than 15 years at the conclusion of the lease
- Classic and collectible cars
- Cars currently owned outright by the employee or with an alternate form of finance

**Not eligible:** Motorbikes, boats, and trucks

Question 7

How do I charge my electric vehicle?

Accepted Answer

As part of your novated lease with Inside Edge, you receive a **Chargefox card**. You can use this card to charge at any Chargefox charging station, including Chargefox-connected stations in your home or business. All charges incurred by the use of this card will be billed to your account.

Question 8

For electric vehicles, should I have range anxiety?

Accepted Answer

To answer this question, ask yourself how many times have you run out of petrol?

If the answer is rarely, this indicates you are aware that you need to re-fuel and you manage that effectively.

Similarly, most EVs will let you know how long you have to go and furthermore, where the charging points are. And remember, **you can charge it at home every night**.

Question 9

Are there sufficient electric vehicle charging points?

Accepted Answer

**Yes**, the number of public charging points is increasing every day. The Government is also committing to increase infrastructure across the country as sales increase.

Visit [plugshare.com](https://plugshare.com) to explore charging points across Australia.

Question 10

What are the benefits of an electric vehicle?

Accepted Answer

Driving an EV comes with many benefits:
- Environmental friendliness
- FBT savings
- Reduced servicing costs
- Strong re-sale values on EVs

Question 11

Has fringe benefits tax (FBT) been removed from electric vehicles?

Accepted Answer

As part of the **Federal Government's Climate Policy**, EVs with low-to-zero emissions are exempt from FBT.

The policy removes the **FBT liability** on electric vehicles that are:
- Battery electric vehicles, or
- Plug-in hybrid vehicles

With a purchase price below **$89,332** until **June 2025**.

Question 12

Can I buy a car through the Inside Edge dealer network?

Accepted Answer

**Yes**, InsideEDGE has an extensive dealer network operating Australia-wide. The dealer network provides:
- Competitive pricing
- Ability to source cars from interstate and regional dealers
- Best prices on trade-in cars
- Efficient disposal of old vehicles

This ensures novated drivers receive the **best price** on new cars and their trade-ins.

Question 13

Under a novated lease, does the car need to be used for business travel?

Accepted Answer

**No**, a majority of novated leases in Australia are for employees who have **little or no business use**.

Though, if a car is used for business use it's also eligible for a novated lease.

Question 14

Does a novated lease work if a car allowance is provided by the employer?

Accepted Answer

Generally speaking, an employer will provide an employee with a car allowance if there is an expectation of business travel to be carried out in the employee's car. Usually, the car allowance is taxed at the same rate as the employee's salary.

A **novated lease is the most effective means** of spending a car allowance and receiving the **tax savings** available in line with the business usage.

Chat with our friendly team to explore your situation and how you can make the most of a car allowance.

Question 15

Will distance travelled make a difference?

Accepted Answer

**No**, whether you travel **5,000 km or 35,000 km** per year, a novated lease will deliver **tax savings**.

During a consultation, we'll discuss expected driving distances to provide accurate estimates of annual car running costs.

Question 16

Is a logbook required to track kilometres under a novated lease?

Accepted Answer

A logbook is **only required** in circumstances of **high business use**.

Through consultation with a novated lease specialist, it may be determined that keeping a logbook will deliver the best financial outcome.

Question 17

How long is a novated lease?

Accepted Answer

A novated lease can be taken over any of the following periods:
- 12 months
- 24 months
- 36 months
- 48 months
- 60 months

Question 18

What do the terms 'luxury car', 'luxury car tax' and 'luxury car adjustment' mean?

Accepted Answer

### Luxury Car
A luxury car is a new car defined by the ATO by its price and its fuel efficiency.

### Luxury Car Tax
Determined by the ATO, this is applied to cars over a threshold and of certain fuel efficiency. A fuel-efficient car is defined as any car with a fuel consumption of **7 litres per 100 km or less**.

For the financial year of **2023-2024**, the threshold has been lifted to **$89,332**. Cars that meet the luxury car tax threshold attract a **luxury car tax of 33%**.

### Luxury Car Adjustment
The ATO guidelines state that an employer cannot claim the full lease rental for taxation purposes of a car with a purchase price over the luxury car tax threshold.

Inside Edge calculates and provides a **luxury car tax adjustment** as part of the employee's novated lease costs to offset the additional cost incurred by the employer while maintaining the maximum benefit to the employee.

Question 19

What expenses are not included within a novated lease?

Accepted Answer

The Australian Taxation Office (ATO) guidelines state that the following items **cannot be claimed** as part of a novated lease:
- Tolls
- Parking infringements
- Fines

Question 20

How are the operating costs/budgets determined on a novated lease?

Accepted Answer

The operating costs for a novated lease are determined on an **individual basis**.

The following factors play a role in calculating the car's costs:
- Choice of car and its age
- Length of the lease
- Expected annual kilometres

Budgets are based on the **whole lease costs** to anticipate all costs during the car's ownership. Therefore, budgets should **not need to change** during the lease unless circumstances change.

Question 21

How is the GST on a novated lease treated?

Accepted Answer

Under a novated lease, because most employers are **GST-registered**, **GST is claimable**. This represents a **10% saving** on ownership and running costs of a car.

This is one of the **key benefits** to employees, **not available under any other form of car finance**.

GST can be claimed on:
- Purchase price
- Lease rentals
- Servicing
- Maintenance
- Repairs
- Tyres
- Fuel
- Comprehensive insurance
- Registration
- Management fees

Question 22

Are novated leases affected by fringe benefits tax (FBT)?

Accepted Answer

At Inside Edge, we structure novated leases in such a way that **FBT is reduced to zero**.

This is achieved through a **detailed understanding** of each employee's circumstances and constructing each employee's novated lease with a **combination of pre-tax and post-tax deductions**.

Question 23

How is FBT calculated?

Accepted Answer

Under FBT legislation there are **two methods** used to calculate the potential FBT associated with novated leases:

### Statutory Formula Method
Used for a **majority of novated leases** as most employees do not use their cars for business purposes.
- Provides **tax savings**
- **No logbook** or kilometer justification required

### Operating Cost Method
If a car is **used for business purposes**, this method may deliver the best financial outcome.
- Requires a **logbook** to be kept for 12 weeks
- More detailed tracking of business use

Question 24

Have there been any changes to FBT legislation?

Accepted Answer

**Before 2011:** FBT calculations under the statutory formula were determined by the **annual kilometres travelled**.

**Current:** The legislation changed and now **one statutory rate of 20%** applies.

Novated leases maintain the **same benefit** regardless of kilometres travelled.

Question 25

What is an 'employee contribution' method?

Accepted Answer

Under FBT legislation, any time an employee **contributes to a benefit** being supplied by an employer, the contribution will **reduce the fringe benefit obligation**.

You can choose to make a contribution when the **tax paid on the contribution is less than the FBT rate**.

In calculating the benefits of a novated lease, Inside Edge calculates the contribution required to **bring FBT to zero**.

Question 26

How are the payroll deductions calculated?

Accepted Answer

Once all costs associated with ownership and running of the car, and the lease rental are determined:

1. The appropriate **post-tax deduction** is used to bring the **FBT to zero**
2. The remainder becomes a **pre-tax deduction**
3. These figures form the basis of the **payroll deductions**
4. Deductions are determined by the employer's **payroll cycle** (weekly, fortnightly or monthly)

Question 27

What if payroll deductions do not match actual costs?

Accepted Answer

Usually, the budgets will **match the costs over the life of the lease**.

In the event payroll deductions do not match expenses, a **re-costing of budgets** may be necessary.

**Re-costings can be instigated by:**
- The novated lease holder
- Inside Edge

Inside Edge **monitors the costs and balance** to ensure **maximum tax benefits** are being achieved without accruing negative balances within the lease account.

Question 28

How are salary deductions managed?

Accepted Answer

Upon receipt of salary deductions, **Inside Edge holds funds in trust** in anticipation of the costs related to the day-to-day running of the car.

You can **view all deductions and expenses** via the **Inside Edge portal**.

Upon termination:
- **Credit funds** are returned to the driver via payroll
- **Debit funds** need to be paid by you as the driver

Question 29

How is finance arranged under a novated lease?

Accepted Answer

The finance lease is arranged by **Inside Edge**.

We use a **panel of banks and financiers** to ensure the **best product, terms and interest rates** available are provided at all times.

Question 30

How is fuel purchased under a novated lease?

Accepted Answer

At the commencement of a novated lease, a choice of **fuel cards** is available to assist with the purchase of fuel:
- **Ampol Card**
- **BP Card**
- **Shell Card**

Various **discounts have been negotiated** and are **passed on in full** to each novated leaseholder in line with the fuel expenditure.

Question 31

How is scheduled servicing and maintenance managed under a novated lease?

Accepted Answer

Inside Edge utilises the **Smart Fleet network** to provide an efficient service and maintenance program.

This network represents:
- All authorised manufacturer service outlets
- Tyre and windscreen replacement outlets
- Recognised service centres

**When a car is due for service:**
1. Book into your preferred authorised service centre
2. Advise that the vehicle is managed by Inside Edge via the Smart Fleet program
3. The service centre will seek service and maintenance authorisation via **Smart Fleet on 1300 780 097**

This **protects against overservicing and overcharging**.

This applies to all servicing, general maintenance (including batteries) and tyre replacements and repairs.

Question 32

What is an extended warranty?

Accepted Answer

New cars are sold with car warranties which may vary in duration depending upon the manufacturer.

An **extended warranty** can be purchased and is an **extension of the initial manufacturer's warranty** to match the **lease period** or **ownership intentions**.

Question 33

Is comprehensive insurance included?

Accepted Answer

A car under a novated lease **must be under comprehensive insurance at all times**.

**Inside Edge offers comprehensive insurance** as part of the novated lease program.

You can also organise your own comprehensive insurance if preferred.

Question 34

What is lease protection insurance?

Accepted Answer

**Lease protection insurance** is an **optional insurance** made available by Inside Edge.

It provides **financial protection** in the event of:
- Involuntary redundancy
- Disability

For a period of up to **six months**.

The current policy also includes an **option to return the vehicle** with a **maximum claim amount of AUD $15,000**.

Question 35

What car operating expenses are paid and reimbursed by Inside Edge?

Accepted Answer

### 1. Registration
Under a novated lease, as the car is owned by and registered in your name, the registration renewal will be sent to your address. You must pay the premium and seek reimbursement from Inside Edge.

### 2. Comprehensive Insurance
If you choose to arrange your own insurance, this will need to be paid and then reimbursed from Inside Edge.

### 3. Fuel Costs
Fuel not purchased with the fuel cards provided by Inside Edge can be reimbursed.

### 4. Insurance Excess
In the unfortunate event of an accident requiring an insurance claim and the payment of an excess, the excess may be claimed if there are sufficient surplus funds or if an adjustment is made to increase the deductions. Once sufficient funds have accumulated the excess can be reimbursed via Inside Edge.

Question 36

How does the reimbursement process work?

Accepted Answer

To gain reimbursement, simply **login and follow the prompts** to **enter and submit your claim**!

Quick and easy process via the Inside Edge portal.

Question 37

What if high business use is required?

Accepted Answer

**Business use doesn't hinder the benefits** of a novated lease.

The difference between private use and a high percentage of business use is in the **method of FBT calculation**.

Keep in mind: In most instances **travel to and from work** is considered **private travel**, not business use.

Question 38

What happens if I leave my employment?

Accepted Answer

If you leave your employment, the **novation agreement is cancelled** and the **lease and the car payments become your responsibility**.

**It's essential to notify Inside Edge** of any changes in circumstances so that we can help you plan in advance.

### Upon Leaving Employment, You Have Three Options:

1. **Re-novate** the finance lease to a new employer
2. **Continue** with the finance lease in your name via direct debit
3. **Sell** the car and payout the lease

### Reconciliation
Once the agreement has been cancelled, Inside Edge will conduct a **reconciliation** of the actual costs compared to the payroll deductions collected. The reconciliation may take up to **45 days** to complete as outstanding fuel and maintenance invoices need to be received from all suppliers and vendors.

**If there is a credit:** The amount will be paid to the previous employer who will pay you via payroll (taxed at the marginal tax rate).

**Any negative balance or shortfall:** Will need to be paid by you to Inside Edge.

Question 39

How does re-novating the lease to a new employer work?

Accepted Answer

Inside Edge **does the heavy lifting** to renovate your lease for you.

Once set up, your **payments will be deducted** via your **new employer**.

If your new employer **doesn't have an existing program**, Inside Edge will **assist in implementing a program**.

Question 40

Can I sell the car and pay out the lease?

Accepted Answer

**Yes**, selling your car before the lease ends is an option.

**Important Consideration:** A lease agreement is a **finance contract with a fixed rate for a fixed term**. If a lease agreement is **paid out during the contract**, the **payout figure may be higher** than the **market value** of the car.

**Careful consideration** should be given, then, before choosing this option.

Question 41

What happens at the end of a novated lease?

Accepted Answer

Inside Edge will **make contact** with you at least **4 to 6 months** before the lease ends to discuss options.

### The Options Include:

#### 1. Refinance the Lease for a Further Period
Inside Edge will assist the employee to **refinance/rollover** the residual value for a **further lease period** to suit your circumstances.

#### 2. Purchase a New Car and Trade In or Sell the Existing Car
Inside Edge can **negotiate trading** your current car with a new car to ensure the **maximum value** is achieved.

The dealer will:
- Trade the existing car in
- Pay the residual value
- Pay any profit over and above the residual value to you

If the car isn't worth the residual value, you'll need to make up the shortfall.

#### 3. Payout the Car
At the end of the lease, you have the **right to purchase** the car at the **residual amount plus GST** and own it outright.

Question 42

What happens if extended work leave is taken during a novated lease?

Accepted Answer

If you take **extended leave** from employment and are **not receiving pay**, the **novation of the lease will cease** and you will be **responsible for the lease and running costs**.

**If extended leave is planned**, Inside Edge can **assist with payment planning** by **increasing deductions** to meet the car's running costs while on leave.

Question 43

What is a residual value?

Accepted Answer

A **residual value** is an **amount owing** at the conclusion of the lease and generally represents an **estimate** as to the **future value** of the car.

The **ATO has guidelines** on the appropriate residual value to be used under a novated lease.

The effect of a residual value on a novated lease will **reduce the monthly lease rental** and **limit the benefit of a novated lease**. It's for this reason the ATO has set out guidelines.

**There's no obligation** to meet the residual value liability. This can be done by any of the following options:

1. **Pay** the residual value to own the car outright
2. **Refinance** the residual value for a further lease term
3. **Trade** the vehicle in (any shortfall between the car's market value and the residual value needs to be paid by the driver, and any surplus will be paid to the driver with no further tax implications)

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