This article is part of our “being smart with your salary” series, a series of articles created to provide simple and easily understood answers to many frequently asked questions about Salary Packaging. For a simplified discussion or quoting on Salary Packaging that is easier to comprehend, contact Motor Vehicle Solutions on (03) 9682 7580.
The administration of your Salary Packaging and Novated Lease can often be confusing for those undertaking Salary packaging for the first time. But by understanding how the Salary Packaging and Novated Lease process both start and ends ensures you are fully informed, and can be fully prepared for future decisions about your vehicle.
How does the Salary Packaging process start, and how does it impact my income once started:
Once you have accepted your Salary Packaging quotes and are ready to proceed, you will then be required to arrange a Novated Lease to pay for the vehicle. In most cases the lease payment will be deferred by two months, which will give your Salary Packaging company enough time to build up funds in your account to begin paying for the finance and running costs of your vehicle.
Once your Novated Lease has been settled, and the vehicle has been paid for, you will then have to submit the required application forms of your Salary Packaging company, which will usually also include submitting the paperwork of your lease as well as the tax invoice for the vehicle and a recent payslip.
Once your Salary Packaging account has been set up, your employer will remit the agreed upon amount of your salary directly to your Salary Packaging company before remitting the rest of your income back to you. With a Salary Packaging agreement in place, by the time you receive your income, the vehicle expenses covered under your agreement for that period have already been paid!
What happens at the end of the Novated Lease, and what are my options with the vehicle at the end:
As the vehicle is fully owned by the customer undertaking the Salary Packaging, the customer has full control to decide what they want to do with their vehicle at the end of their Novated Lease. The most important aspect of the end of your lease, and the aspect worth prior consideration by the customer when setting up their Salary Packaging arrangement, is the residual payment of the vehicle to be paid at the end of the lease.
Under a Novated Lease, the Australian government have set minimum residual payment requirements at the end of the lease term that are to be paid when the lease expires. These residual amounts are a percentage of the amount financed, and are dependent on the length of the lease. These residual values are meant to reflect the value of the vehicle at the end of the Salary Packaging agreement.
For those customers that drive more kilometres than the average person, enquire about applying for a lower residual value to ensure your residual value and the value of your vehicle are similar at the end of the Novated Lease term.
In order to finalise the Novated Lease, the customer must pay the remaining residual payment. Customer’s have three options for how you they proceed with paying their residual value:
- Trade your vehicle in and get a new vehicle
- Refinance the residual payment
- Pay out the remaining residual payment, and retain clear title to the vehicle
Are you being smart with your salary? For more un-complicated answers to your Salary Packaging and Novated Lease questions, call Motor Vehicle Solutions on (03) 9682 7580 or CLICK HERE to discuss how you can get the most out of your Salary Packaging agreement.