Novated Leasing : Frequently Asked Questions

What is a novated lease?

A novated lease is a three-way agreement between the employer, the employee and Enlist. There are two separate parts to a novated lease; a primary lease agreement and a deed of novation.

A primary lease is a contract between the employee and Enlist. The lease is a fixed monthly rental agreement over a nominated period with a lump sum final payment (residual) at the end of the contract.

A deed of novation is a separate agreement between all three parties that sits behind the primary lease. The deed transfers obligations of the lease (with exception of the residual) from the employee to the employer for duration of the employment period or until novation deeds are cancelled or until maturity of the lease period, whichever is first.


Do I have to buy a new car?

No, you can salary package used vehicles as long as your employer’s policy allows you to do so. This may also include an opportunity to salary package a vehicle that you may already own (known as a sale-and-leaseback).


Can I salary sacrifice more than one car?

Yes, as long as you earn sufficient income and can afford to salary sacrifice multiple vehicles. There is no law restricting the number of novated lease vehicles that an employee can include in his or her salary package. You will need to check with your employer that the corporate policy allows you to do so.


Can I salary package a car that I already own?

Yes. It may be possible to salary package your own vehicle by selling it to Enlist and leasing it back for an agreed period under a novated lease structure. This often creates a smart way of restructuring total debt in a tax efficient way because the money you receive from Enlist is repaid from pre tax salary and can be used to reduce other ineffective tax debts such as personal loans or mortgages. This type of arrangement is commonly referred to as “sale-and-leaseback”.

If you do not need to raise money against your car then it may also be possible to salary package without a sale-and-leaseback arrangement by structuring an Associate Lease agreement with your employer. The next question explains Associate Lease structures. Please consult your employer whether this type of arrangement is permitted under your employer’s corporate policy.


What is an Associate Lease?

An Associate Lease is a rental agreement between an employee’s “Associate” (most commonly a spouse) and the employer. The parties agree for the employer to rent a vehicle from the Associate for an agreed amount and period.

Once the vehicle is leased by the employer from the Associate, the employer will normally deduct the lease rentals, running cost provisions and FBT from the employee in exactly the same way as a novated lease.

This type of arrangement allows employees to shift some of their pre tax salary to an Associate who is normally taxed at a lower income tax rate. This results in tax savings and ultimately reduces the cost of vehicle ownership.

Associate Leases are most commonly favoured by employees who wish to salary package a family vehicle which is either too old to re-finance or when employees have no other personal debts that can be restructured more tax effectively.


Can I pay for my insurance and registration with the fuel card?

No, it is not possible to pay registration and insurance with the fuel card. You can either pay for these expenses directly and claim reimbursement from Enlist or forward the bills to Enlist and we will pay the suppliers directly. Please check your employer’s policy or contact Enlist for more details.


What if my mechanic does not accept your fuel card?

Enlist provide a card that can be used to purchase fuel, lubricants, services, repairs, tyres and car washes at more than 6,000 merchants nationally. Most petrol stations, car dealerships and reputable merchants accept our fuel and maintenance card. If however you choose a merchant who does not accept our card then you can simply pay the bill directly and claim a reimbursement for the expense from Enlist. We process all reimbursement claims within five working days so you will have the money back before you know it.


What happens if I sacrifice more (or less) than I actually spent for my fuel and other running costs?

All cost variations between budgeted salary sacrifice deductions and actual expenses are reconciled back to you in full at the completion of the lease or termination of the novation agreement, whichever is first. Whatever it costs to run your vehicle is what you end up paying including all merchant discounts for repairs and maintenance. Neither your employer nor Enlist will look to make a profit from positive balances or losses from negative balances. The shortfall or surplus of the final balance will be settled through salaries on a pre tax basis.


What happens if I fail to meet my target kilometres?

At the end of each FBT year (31 March) you will be required to submit an odometer declaration stating your final odometer reading as at the end of March. FBT reconciliation will then be performed to ascertain whether sufficient provisions have been deducted from you throughout the year or alternately whether post tax contributions have sufficiently offset the FBT value. An adjustment will be made to either recover any FBT shortfalls or reimburse excess FBT deductions back to you. FBT shortfalls are normally recovered from your pre tax salary and FBT reimbursements are paid as taxable salary which requires income tax to be withheld at your marginal tax rate.

Please note that if you have used post tax contributions to offset FBT then there is no FBT to be reimbursed. However, subject to your employer’s policy and your employment contract it may be possible to refund the portion of income tax that was withheld on the excess amount of your post tax contributions.


What happens if my employment finishes?

In the event of employment termination you have one of three options:

1) Pay out the lease from personal savings or proceeds of sale (if vehicle is to be sold);
2) Transfer lease to a new employer. This option is subject to policy conditions of new employer; or
3) Continue to pay lease rentals and running costs from personal savings.