A Novated Lease is a three-way agreement between an Employee, Employer, and the Novated Lease company to provide a service such as providing a vehicle and it's associated costs out of the employees pre tax income.
To set up a novated lease the Employee will need to approach their employer to confirm that this agreement is something that the company is comfortable with entering into and to ask whether the company already has an existing nominated novated lease company. The employee then needs to contact and arrange for the agreement to be drafted with the nominated novated lease company.
In essence, the agreement involves the following.
- The employer reduces the employee's before-tax income by the agreed amount on the prescribed bases.
- The employer using the amount that was reduced to direct it to the novated lease company.
- The novated lease company provides the service as described in the agreement for the designated period of time.
- The employee compensates the employer for the FBT amount as an after-tax payment.
ClockOn recommends that employees and employers do their research before entering into any specific agreements.
To set this up within ClockOn you will need to create two allowances for the employee, for how to open the allowances screen click here.
First, create an allowance to reduce the employees before tax wage, please see below for the
The second allowance required is to reduce the employee's After-tax portion for their fringe benefits tax contribution to be in which the payment is handled by the employer.
Please note that prior to submitting your EOFY finalization you will need to enter FBT value directly into the RFBA value on the employee YTD screen as shown below for it to show on the employee's MyGov portal.