Novated leasing: the whys and hows
Cars can be expensive – and a bother to keep track of when it comes to costs and upkeep. By salary packaging a car through Maxxia, you can soften the hip-pocket pain and remove much of the hassle.
Once you’ve decided on your car (which we can also help with) we establish a simple annual budget that rolls all your car’s running costs – including finance, petrol, servicing, registration and insurance – into one regular payment using a combination of your pre- and post-tax salary.
This means potential tax savings, no more juggling bills and due dates, and you don’t pay GST on the purchase price of a new car, either!
How does novated leasing compare to a car loan?
Hold the GST
That’s right – when you source a new car through Maxxia you not only get access to our nationwide buying power, meaning competitive prices on an extensive range of new cars, but you don't pay GST on the purchase price.
Our nationwide buying power gives us access to lots of great cars – and great deals.
Potential tax savings
Because part of your car payments come from your pre-tax salary, your taxable income could be less. (Once your deductions commence, your payslip will show the pre- and post-tax deductions made to Maxxia relating to your novated lease.) With a regular car loan, you’d be making payments with your post-tax salary – and giving more to the taxman.
Access to competitive third-party pricing
As one of Australia’s leading novated lease providers, we have long-held relationships with suppliers and insurers nationwide, and can help you get competitive prices. No more worries about insurance coverage and over-charging mechanics.
Roll up, roll up
Cruising along an open road in your new car aside, it’s the convenience of a novated lease that many enjoy. In addition to your car repayment, all of those dreaded running costs – fuel, servicing, insurance and, most pertinently, registration – are rolled up into one regular payroll deduction. And the cherry on top? You could save on tax!
I prefer vehicle ownership over leasing – why should I lease?
A novated lease allows you to use pre-tax dollars to pay for your car’s repayments and many of the running costs that you’d ordinarily have anyway – including big-ticket items such as registration, insurance and servicing – which could lower your taxable income while providing you with the peace of mind of having everything pre-budgeted for.
Plus, at the end of the lease, you have the option of upgrading to a new car while continuing to enjoy the convenience and tax benefits of salary packaging a car.
What is the approval process?
At Maxxia, getting approval for your novated lease is fast and easy. In fact, our customers often tell us that the application form is quicker to complete than most other finance application forms.
Wherever possible, we approve applications within four hours of receiving your request.
What happens at the end of the lease?
Near the end of your lease – usually one to five years – we will contact you to discuss your options. You may be able to:
- keep the car: you pay the remaining amount owing on the car (conditions may apply)
- refinance the car (conditions may apply if the car is more than seven years old at the end of the lease, or valued at below $5,000)
- upgrade to a new car: you would trade in your current vehicle and pay any amount owing
- sell the car: you will need to pay off the remaining amount owing
- Return the car utilising your Residual Protection Cover
Prior to the end of your lease you will receive an email from us that provides information regarding your account and the residual payment you will need to make to your financier..
- From the final day of your lease, it will take Maxxia approximately 30 days to reconcile your account. During this time we will finalise your account including all outstanding charges and maintenance invoices.
- After this 30 day period has passed, any excess funds in your account will be returned to your employer so that it can be paid out to you as part of your income, with income tax being applied. Alternately, funds may be retained for your new lease or applied to another salary packaging benefit. Contact us to discuss your options.
- If we have collected more post-tax funds than required, we will arrange to have this returned directly to your nominated bank account. Please ensure that we have your current bank details.
- If your account is overdrawn, we will contact you to discuss payment arrangements.
- In the last month of your lease, even though the final lease payment or residual amount has been made, Maxxia will be required to deduct the final scheduled income amounts to avoid any FBT liability that may occur.
Please be aware that once your lease ends, the following items will also cease:
- Payments to the finance company arranged by Maxxia
- Your fuel cards
- Maxxia-arranged roadside care
- Your ability to submit claims via Maxxia Online and the Maxxia app.
If you hold a Maxxia arranged insurance policy:
In some cases you may have the option to continue your coverage until the existing policy end date or alternatively request a refund for any unused portion of your policy.
To view specific details of your Maxxia arranged insurance policies, log in to your Maxxia Online account or check the Maxxia App. Additionally, you can call us on 1300 123 123 to discuss your options.
To ensure you are prepared for the end of your lease, simply complete the following steps:
1. Send us any outstanding claims:
You can still send any unclaimed expenses such as servicing costs, rego and fuel for your vehicle (incurred prior to the end date of your lease) to Maxxia within 2 weeks of your lease ending so that these can be reimbursed from your account balance.
2. Arrange new vehicle insurance:
Your Maxxia arranged insurance policy may be ending. If this is the case, please take steps to ensure you are covered.
3. Finalise your residual payment:
- At the end of your lease there will always be a residual or balloon amount owing.
- Your residual payment is due on the final day of your lease and must be paid directly to the financier.
- As the funds in your novated leasing account are considered to be pre-tax money, they cannot be applied directly to the residual payment.
- Please contact us if you require any further information regarding your financier and residual payment amount.
What information do I need before I call to enquire about novated leasing?
It depends on how much information you require on your initial phone call, but it might be a good idea to have at your disposal:
• the make and model of your current car (if you have one);
• an idea of the make and model of the car you want;
• approximation of your current car’s running costs;
• how many kilometres you think you’ll travel each year;
• your employer and annual income.
Do I earn enough to benefit from a novated lease?
Yes. The claim “you need to earn big to benefit from a novated lease” is probably the myth we have to debunk most.
A novated lease can put you behind the wheel of a car you might not usually be able to afford – regardless of your income. (For example, an employee earning $60,000 could save $2,654 a year on a novated lease.)
You don’t pay GST on the purchase price of a new car on a fully maintained lease, instantly saving you thousands, and then there’s the convenience: all your car’s running costs – fuel, servicing, registration, insurance – are bundled into one regular payment, meaning bill shock is a thing of the past.
So you’re potentially saving time and money – and reducing your stress levels.
Do I drive enough to benefit from a novated lease?
Whether you drive fewer than 10,000 or more than 50,000 kilometres a year, a novated lease is a great way to finance a car. And you could save on tax.
When will my contributions start?
The start of your contributions will depend on your employer’s cut-off dates for making changes to your pay. It can take up to two weeks for your contributions to start, but we will email you your Benefit Summary outlining the amounts and commencement date.
Can I choose the car?
You certainly can! In most cases you’re not limited to any particular car type, model or make. You’re not restricted to just new cars with a novated lease, either – you can lease a used car, or even your existing vehicle through a Sale and Leaseback arrangement. (Some conditions may apply.)
Are there any restrictions on the age of the car?
Generally, a car should be no older than 10 years at the end of the lease. Exceptions may be made for prestige or collectable vehicles that retain their value over time. Contact us to determine if your vehicle fits under this exclusion.
Are there any cars I can’t lease?
Yes, some employers have a specific list of cars available to their employees. Beyond that, vehicles designed to carry one tonne or more and designed to carry nine passengers or more are also unavailable. If you’re in doubt, please contact us so we can discuss the eligibility of your proposed vehicle.
Can I salary package my own car?
Yes, you can enjoy the convenience, budgeting benefits and potential savings of a novated lease by packaging your existing vehicle through a Lifestyle Lease arrangement. Call 1300 123 123 for more information.
When I get my estimate/proposal, what are the next steps?
• Review the numbers to ensure you fully understand them and are happy with them (if not, get in touch);
• Confirm you are ready for your Novated Lease Offer to be sent out;
• Review your Offer once received, and, if happy, sign and return to us;
• Receive, review and sign your Lease Documentation to enable delivery or pickup of your car;
• Enjoy your new car!
Can my estimate be adjusted?
Yes, you can adjust your estimate at any time prior to signing your final contract.
How does the residual payment work?
It’s legislated that all novated leases require a residual – or “balloon” – amount to be paid the end of the finance agreement. The residual percentage applicable is determined by taxation rules, and is applied to the amount that you finance. How much the residual payment comes to depends on the lease duration and estimated value of the car at lease end. Please get in touch and we can advise of the residual amount applicable to you.
Are there different types of novated leases?
Yes, there are two types: Fully-Maintained and Self-Managed.
Maxxia coordinates everything on your behalf – including sourcing your car and finance, arranging all the paperwork and fuel cards, and paying your bills. All your vehicle repayments and running costs are bundled into one regular payroll deduction.
You are responsible for sourcing the vehicle and pay any insurances upfront. You’re also responsible for all your own budgeting and bill payments (including servicing), which will then be reimbursed.
Yes, there are two types: Fully-Maintained and Self-Managed. This table outlines the differences between the two: Comparison-Fully Maintained Novated Lease vs Self Managed Novated Lease
Can I start a novated lease at any time?
Yes, you can start at any time of the year. Some people wrongly believe that you have to wait until the beginning of the Fringe Benefits Tax (FBT) year in April to start a lease.
What is not included in a novated lease?
A novated lease does not include road tolls, traffic infringements or accessories fitted to the car after purchase.
What happens if I change jobs during the lease term?
With people changing careers more than ever, this is a likely scenario for many people. But you have a number of options available, including:
- paying the amount owing and buying the vehicle outright
- continue paying the lease and running costs yourself (with post-tax dollars)
- transfer the lease to your new employer (subject to your new employer's approval)
What if I spend more or less than I budgeted?
We understand circumstances change, markets fluctuate and all manner of other variables can push your expenses north or south. But we’re here to help.
If you have spent MORE than budgeted…
We will contact you to discuss increasing your regular payments to ensure you can cover the higher amount. You should also monitor your online statements regularly and contact us if you notice your budget is being overspent. Then we can adjust your deductions even sooner.
If you have spent LESS than you budgeted…
At the end of your lease term we will reconcile your account within 60 days. If there is money in your account, we will send the funds to your employer. Your employer will then deduct income tax and pass the remaining balance back to you.
Can I just package my car’s running costs?
No, you cannot only package your running costs through a novated lease arrangement; finance repayments must be included.
How long is the lease term?
A novated lease can be taken out over any period from one to five years.
Does novated leasing impact any other salary packaging benefits I might have or be entitled to?
No, novated leasing is a benefit that can be taken out in addition to any existing salary packaging caps you have. That means, if you work for a health or charitable organisation (and dependent on your employer’s salary packaging policy) you could package up to $9,010 and $15,900 respectively on full FBT items, as well as $2,650 on meal entertainment or venue hire, in addition to a novated lease.
How do I get my car serviced?
Maintenance and servicing costs are budgeted for as part of a fully-maintained novated lease. In most cases, two services a year – based on time or mileage – are scheduled throughout the least term.
The process is simple. When you drop your car off, let the supplier know Maxxia looks after your car and ask them to contact our Maintenance Centre on 1300 123 123 before they commence any work.
Our qualified and experienced team will ensure:
- work meets the car manufacturer’s standards
- work carried out is reasonable and consistent with the age and condition of your car
- work is covered by warranty is free, and
- labour and parts are supplied at competitive prices
Our Maintenance Authorisation Team will also organise payment directly from your Maxxia ‘My Car’ account. To ensure there is enough funds in your account, we recommend you regularly check your balance via Maxxia Online. Once the work is completed your mechanic will contact you to collect your car.
Please note: additional services carried out between scheduled services are not included in your budget. For maintenance work outside of your standard budget, please call us on 1300 123 123 to discuss.
Can I terminate my novated lease early?
When you enter into a novated lease, you agree to lease the vehicle for a fixed period of time. So it’s important you structure the lease over a period that reflects how long you wish to keep the vehicle for. If you decide to terminate your lease early, depending on the length of lease that has expired, the payout figure may be higher than the current market value of the vehicle, and typically include fees and charges imposed by the financier.
How do I activate my fuel card(s)?
If you’ve requested a fuel card it will arrive via postal mail within one to two weeks. If you haven’t received it within two weeks, it’s important you contact Maxxia as soon as possible to prevent any unauthorised activity.
• BP Fuel Card
Within 2-3 days of receiving your card, you’ll also receive a separate 4-digit PIN.
You will need to use this PIN the first time you use your card. After this, you can change your PIN at the service counter at any BP station.
• Caltex Fuel Card
When you use your card for the first time, you will need to set a 4 digit PIN of your choice. If you need to change the PIN, you can simply request this at the service counter at any time.
• Shell Fuel Card
When you use your card for the first time, you will need to set a 4 digit PIN of your choice. If you need to change the PIN, you can simply request this at the service counter at any time.
The letter attached to your card will further explain how to use it.
What happens if I go on unpaid leave during my lease term?
Simply login to your Maxxia Online account and use the Contact Us section to let us know well before you start your unpaid leave. When you take unpaid leave, your employer will stop paying funds into your novated lease account. This means there may not be enough funds in your account to pay for your regular lease payments, running costs or FBT. We can discuss a range of options available to you to avoid any inconvenience or unexpected bills.
What happens if my car breaks down?
Maxxia offers 24/7 roadside assistance to almost anywhere in Australia for as little as $6.50 per month (GST inclusive), the cost of which is deducted from your salary packaging account balance. In the event of a breakdown call 1300 123 123 and ask to be put through to our Roadside Assistance team, who can give advice over the phone and coordinate a range of services to get you back on the road. If you need roadside assistance after hours, you can still call 1300 123 123 and follow the prompts to be transferred through to our 24/7 service.
What types of car insurance can Maxxia arrange, and what do they cover?
With a fully-maintained lease, Maxxia can help to arrange your insurance at competitive rates. We offer the following insurance products:
Comprehensive cover against loss or damage to your vehicle or someone else’s caused by accident, theft, malicious damage or fire.
Lease Protection Insurance
Cover for your lease payments and the running costs associated with paying out your lease, in the event you are made involuntarily redundant. You also have the option of handing the vehicle back and the policy will pay any gap between the payout under your finance contract and the sale price of the vehicle.
Total Loss Assist
In the event that your vehicle is declared a total loss by your comprehensive insurer, Total Loss Assist covers the difference between your comprehensive insurance payout and either the amount you originally paid for the vehicle or the amount needed to settled your finance contract – whatever is the greater.
Safeguard Ultimate Warranty
An extension of your Manufacturers’ Warranty subject to the terms and conditions of the policy. It is designed to cover unforeseen defects, failures and faults of a mechanical or electrical failure.
Residual Protection Cover
When your lease ends, if the Fair Sale Price of your vehicle ends up being less than the ATO discounted value, Residual Protection Cover will cover the difference between the two, up to the maximum cover of $20,000.
For more detail on the insurance products available, refer to our Factsheet and the Product Disclosure Statements.
How do I pay for my insurance?
If we have arranged your comprehensive insurance for you, you don’t need to do anything when your renewal is due. If you are still satisfied with the policy, we will pay the premium from your novated lease account. Other insurance products are paid for upfront for the life of the lease. If you have any questions, give us a call.
If you are using your own comprehensive insurance provider, you can pay the account and claim reimbursement for this cost. Simply submit a claim form along with all the pages from your policy document and proof of payment. We’ll then reimburse you from your novated lease account.
Do I have to use Maxxia insurance?
Not at all. If you're happy with your comprehensive insurer we simply budget for the annual premium and put that money aside so you can make the most of your pre-tax benefits. But if you choose to include Maxxia’s insurance provider in your novated lease you can rest easy knowing you’re fully covered and for a very competitive premium.
Can I use my fuel card with any other car?
No, your fuel card can only be used for your leased vehicle. If you do accidently use the card with the wrong car, please let us know as soon as you can to avoid card cancellation or any other inconvenience.
What is Lifestyle Lease?
While novated leasing is available on new and used cars, Lifestyle Lease lets you enjoy many of the benefits of a novated lease – the potential savings, the convenience and budget benefits – on your existing vehicle. In a Lifestyle Lease arrangement Maxxia will purchase your vehicle, freeing up any equity you have in it, and you lease it back through a novated lease. Some of the features of Lifestyle Lease are:
- the option to access the benefits of a salary packaged novated lease when you don’t want or need a new car
- the ability to retrieve the equity tied up in your car to use as you see fit
- an alternative to the finance arrangement associated with your vehicle and
- the peace of mind that can come from knowing major expenses such as registration, insurance, servicing and other costs are all covered through regular payments administered by Maxxia
What does FBT and ECM mean?
You’ve probably seen both these acronyms pop up in your benefit quote or online calculator result.
Fringe Benefits Tax (FBT) is a tax which is applied to benefits you receive from your employer that are not in the form of cash salary or wages. For example, a novated lease is a benefit outside your cash salary or wages – so it is subject to FBT. As of the 1st April 2017, the FBT rate is 47%.
This is where the ECM bit kicks in.
But what does ECM mean? Now a standard novated lease calculation, the ECM – or "employee-contribution" method – helps offset any FBT you may be liable to pay on your novated lease. By making after-tax as well as pre-tax payments you reduce the taxable value of your car, and minimise the risk of FBT liability at the end of the FBT year (31 March).
Are the laws changing for novated leasing?
You'll be delighted to know – especially if you're considering a new car – there have been no changes to novated leasing legislation.
The Australian Government cancelled the proposed changes to novated leases in September 2013. This means the same great benefits and potential tax savings still apply.
In addition, previous changes made by the Federal Government in 2011 means it no longer matters how far – or how little – you drive, you could still benefit from a novated lease.
Can I take out multiple novated leases?
Whether you’re seeking a ‘weekend car’ or something for an immediate family member, you can - subject to your employer's novated lease policy - lease multiple new or used cars and get the same convenience and cost-effectiveness. The additional vehicles would be leased under your name and the payments deducted from your salary.
Where can I go to access all my account details?
You can access all your salary packaging information 24/7 via Maxxia Online, your secure customer portal.
Once logged in, you can check your transactions, change your details and make a claim when and where you want. It’s the convenient way for you to manage your salary packaging account. If you haven’t already registered, go to securemaxxia.com.au, click on the Register button and follow the prompts. If you’ve registered but can’t remember your password, just click on the “Forgot your password?” button to arrange for your password to be sent to you.
Is there a credit check involved?
Finance is subject to approval from our financiers – Macquarie and St George – and they will conduct a credit check.
What is included in the repayments?
A novated lease bundles all of your car repayments and running costs into one regular payment directly from your pay. You can use a mixture of post- and pre-tax funds to help pay for your fuel, tyres, insurance, registration, maintenance and even car detailing. By packaging these expenses under a novated lease, you could save on tax.
What happens if I am involved in an accident?
Driving can incur some risks and there is always a potential to be involved in an accident. As such, this is something that is definitely factored into a novated leasing arrangement.
If you have obtained damage to the vehicle that needs fixing, you can opt to have the repairs organised through your insurance provider or, if the cost is less, with a repair centre. The cost of the repairs or the excess incurred is fully reimbursable through your lease.
If your vehicle is deemed a write-off with the insurer, your insurer will either replace the vehicle (subject to T&C) or pay your financier the market value of the vehicle. It is important to understand that dependent on the time that you write-off the vehicle, the outstanding finance may be higher than the current market-value of the car. As such, TLA is an insurance product that can cover that difference.
If you have been involved in an accident on a current novated lease vehicle, we would recommend that you call us on 1300 123 123 to discuss your options.
What do I do if I need to replace tyres?
For tyre replacements, you have access to our network of suppliers including:
- Bob Jane T-Marts
- JAX Tyres
- K-Mart Tyre & Auto
- Or any supplier of your choice
Maxxia have approved pricing agreements with each tyre supplier, however we don’t have access to store discounts or specials. If you want to find out more about Maxxia pricing, then please contact our Maintenance Authorisation Team who can provide you with information and make sure you have access to these fleet prices.
If you want to take advantage of a store discount or special, you will need to pay for the tyres upfront and then make a claim.