As a result of nearly two years of the COVID-19 pandemic, Australia is experiencing a labour shortage in many industries. In sectors which were shut down completely during the lockdowns, many former employees have looked to other industries for work and left the sector. Other sectors reliant on international students and specialist global talent have been affected by the border closures.
According to reports, employers are pulling out all stops in some cases to attract staff to fill job vacancies. Enticements include bonuses and other perks. One option that employers may be considering is a car for the employee.
An employee or company car has long been a popular job perk in many roles and can be used by employers as a bonus for performance or to retain quality and valued team members.
When considering this initiative, there are two main ways in which the car in question can be financed and the package presented to the employee:-
- Offer a fully-funded company car to the employee. The vehicle would be fully-owned by the business and all expenses covered by the business. The employee would have use of the vehicle as specified by the business, but no title or ownership claim to the vehicle. When leaving the employ of the business, the vehicle remains the property of the business and they would relinquish any claim to its use.
- A vehicle purchased by the company but with the employee contributing to the costs by sacrificing salary and as such working towards ownership.
We offer finance for both these types of business vehicle acquisition. Jade Finance explains the options for finance for employee vehicles for your consideration.
When purchasing cars for employees to use as part of the company’s fleet of vehicles, the business can select the type of finance that best suits their financial objectives. With this type of acquisition the vehicle is the property of the business and the business usually covers all costs.
The employee benefits by having use of a company car without the cost. But there is no claim to ownership in part or whole by the employee. This is popular for sales representatives and executives and many employees appreciate having the use of a vehicle without the expense.
Taxation issues such as FBT and other implications would need to be discussed with the business accountant.
The choice of business vehicle finance includes:-
- Chattel Mortgage
- Vehicle Leasing
- Commercial Hire Purchase
While an attractive proposition for some employees, with this option the employee gains only from not having to pay out expenses for the purchase and running costs of their own car.
Novated Car Lease with Salary Sacrificing
An option to a fully-funded company car is a car purchased through the business but with the employee contributing to the costs and with the intention of eventually owning the vehicle.
This is achieved through a finance product called Novated Car Lease with Salary Sacrificing. This type of car leasing involves a financial arrangement between three rather than two parties: the lender, the employer and their employee. ‘Novated’ refers to an obligation being replaced, that is the obligation for the finance agreement between the employee as the buyer and the lender is replace by an obligation between the employer and the lender.
Despite the somewhat technical description, this type of finance is straightforward and quite widely utilised. By engaging Jade Finance to source your finance, you have the assurance that the process will be streamlined and the cheapest deal secured.
We outline the basic features and how it works:-
- Either the employer or the employee may initiate the idea but both parties must agree.
- The employee opts to sacrifice a portion of their salary to go towards the purchase and running costs of a vehicle which will be purchased in the business name.
- The employee can select the vehicle they want.
- The business (employer) takes out the lease for the vehicle purchase.
- The employer pays the monthly leasing payments and the running costs.
- The portion of the employee’s salary that is ‘sacrificed’ is deducted from their pre-tax income.
- The employer benefits by having the tax deductions of the leasing payments and other vehicle expenses as well as any benefit derived from providing such an initiative to the employee.
- The employee benefits by having their pre-tax salary reduced which may result in less tax being paid and they are progressing to owning a car.
- At the end of the leasing term, when all monthly payments and any residual applicable are finalised, the vehicle ownership is handed over to the employee. From that point, the running costs etc become the responsibility of the employee as the Novated Lease is finalised.
- If the employee leaves the business prior to the conclusion of the leasing term, the employee and employer would need to come to an arrangement in regard to the vehicle and the financial obligation.
Novated Car Leasing with Salary Sacrificing can suit all sizes and types of business operations. Jade Finance provides this type of finance for SMEs, large corporations, family enterprises and other business structures.
Businesses are advised to consult with their accountant on any tax obligations and other implications for their operation and the suitability of leasing for their business.
If you’re looking for a more long-term way to attract, retain or reward valued staff members, speak with Jade Finance about how a Novated Car Lease with Salary Sacrificing may work for you.
Contact Jade Finance 1300 000 008 to discuss a Novated Car Lease.
DISCLAIMER: NO LIABILITY IS ACCEPTED IF ERRORS OR MISREPRESENTATIONS ARE FOUND IN THIS ARTICLE. THE ARTICLE IS PREPARED AND PRESENTED FOR GENERAL INFORMATIVE PURPOSES AND IS NOT INTENDED TO BE THE SOLE SOURCE OF INFORMATION FOR MAKING FINANCIAL DECISIONS. THOSE REQUIRING GUIDANCE AND ADVICE SHOULD CONSULT A FINANCIAL ADVISOR.