Novated Leasing FAQ

This page contains most commonly asked Questions and Answers about Novated Leasing.

  1. What is a Novated Lease?

    A Novated Lease offers a simple way of including an employee's vehicle of choice in their salary package at competitive rates.

    Employees can enjoy fleet discounts on vehicle purchase and running costs such as maintenance, tyres and fuel. They also have the flexibility to choose a vehicle that suits their lifestyle and business needs and retain the vehicle if they change jobs.

  2. How does a Novated Lease work?

    An employee chooses the vehicle they want and the finance option that suits them - an Operating Lease or Finance Lease.

    Operating Lease
    The residual value risk remains with ORIX. This option may suit employees that travel large distances each year, increasing the vehicle's operating costs and potentially reducing its resale value.
    Finance Lease
    Transfers the residual value risk to the employee. Employees may choose a Finance Lease with the aim of building equity into the vehicle and purchasing it at lease end.

    The employee, employer and ORIX enter into a Novation Agreement which means the employer assumes all lease obligations and pays the lease rentals to ORIX, as well as any vehicle running and maintenance costs included.

    Monthly lease rentals are deducted from the employee's gross salary which may lead to lower income tax and higher net salary.

    If the employee leaves the company before the lease expires, the Novation Agreement lapses and responsibility to make lease rental payments reverts back to the employee.

    During the lease term, the employer is also responsible for the calculation and payment of Fringe Benefits Tax (FBT). It is important for the employee to understand how their employer manages its FBT liability.

  3. What should I do before I proceed with an ORIX Novated Lease?

    Before proceeding with an ORIX Novated Lease, please ensure that:

    • your employer has a Fleet Agreement with ORIX;
    • you have obtained the appropriate approvals from your employer for you to arrange a novated lease in exchange for salary sacrifice on your part;
    • you have decided which vehicle or vehicle type you would prefer and have selected the options or accessories you require;
    • you know how many kilometres you will travel each year;
    • you have selected a lease duration (i.e. Lease Term); and
    • you have selected a preferred lease type, i.e. Novated Operating Lease or Novated Finance Lease. Please see your employer's vehicle policy.
  4. How do I request a formal quotation or submit an application to ORIX?

    Please contact us on 1300 652 886 to discuss your requirements. We will then provide a quotation for your selected vehicle. Alternatively, you can get an estimate and then complete an on-line quotation request using Novated Lease Calculator.

  5. When should I start this process?

    Depending on your vehicle selection, vehicle delivery times might be up to three months; therefore you should commence the process as soon as possible.

  6. What vehicle choice do I have?

    Generally we don't impose any restrictions. However, some employers have policies that specify certain types of company vehicles.

  7. Can I lease a second-hand vehicle?

    We will consider providing Novated Leases for second hand vehicles from reputable dealers. However, at the end of the lease the vehicle should be no older than 10 years (Conditions apply, please contact ORIX on 1300 652 886 for details). Your employer's company vehicle policy must also permit second hand vehicles.

  8. Can I source my own vehicle quotation?

    Yes, you may source your own vehicle quotation however it is strongly recommended that you take advantage of our discounting arrangements with it's partner dealers to achieve the best possible buy price. Please talk to one of our consultants who will advise the final purchase price once your initial quote request is in our system.

  9. What lease term can I choose?

    Lease terms range from 12 to 60 months. Terms for used vehicles will be determined by the age and kilometres travelled.

  10. What residual value will apply?

    We set residual values for Novated Finance Leases with full regard to relevant rulings by the Australian Taxation Office. The following table identifies the depreciation bands, as stipulated by the Australian Taxation Office (correct as at 1 January 2004), applicable to the corresponding lease terms.

    TermsResidual Value Range
    1 Year63.75% - 70%
    2 Years52.50% - 60%
    3 Years41.25% - 50%
    4 Years30.00% - 40%
    5 Years18.75% - 30%

    When you have selected a vehicle, we will recommend an appropriate residual value for that vehicle depending on expected usage. If you are uncertain about how these arrangements will affect your position, we recommend that you obtain independent financial advice.

  11. How does Fringe Benefits Tax (FBT) affect my lease?

    During the lease term, your employer is responsible for the calculation and payment of Fringe Benefits Tax (FBT). You employer's FBT liability for your lease may be passed on to you and incorporated into your salary package. We can provide you with an estimate of the FBT applicable to your lease using the statutory cost method. This method calculates the taxable value as a percentage of the value of the vehicle based on the appropriate kilometre band. The following table identifies the statutory cost percentage bands, as stipulated by the Australian Tax Office (correct as at 10 May 2011), applicable to the corresponding annual kilometres travelled:

    Distance Travelled (kms)Existing ContractsFrom
    10 May 2011
    1 Apr 2012
    1 Apr 2013
    1 Apr 2014
    0 - 14,99926%20%20%20%20%
    15,000 - 24,99920%20%20%20%20%
    25,000 - 40,000 11%14%17%20%20%
    More than 40,0007%10%13%17%20%

    Please note actual kilometres travelled will determine the statutory percentage applicable to the FBT calculation. If you are uncertain about how these arrangements will affect your position, We recommend you speak to your employer and obtain independent financial advice.

  12. How does Employee Contribution Method (ECM) affect my FBT liability?

    ECM allows you to make pre-tax and post-tax contributions towards the operating cost of your motor vehicle, thus reducing or eliminating the FBT liability. Prior to introducing ECM in 2006, the FBT payable on every Novated Lease was calculated at the highest marginal tax rate of 46.5%. Average income earners were being disadvantaged as their FBT was calculated at the highest FBT rate rather than their own marginal income tax rate.

    Under ECM, the employee is able to contribute to the running costs of the vehicle out of post-tax and pre-tax income. The post-tax contribution can equal up to 100% of the FBT taxable value. Each dollar that is paid toward the operating costs of the vehicle reduces the FBT liability by the same amount. In effect, if the contribution equals the FBT taxable value, the FBT liability can be totally eliminated, which should now leave you with a greater disposable income.

    If the nominated kilometre band is not achieved however and your actual usage is higher or lower than your specified kilometre band, your employer will need to make amendments via your salary. It is important that you predict and accurately monitor vehicle usage to minimise your FBT liability and maximise your tax advantage. We can assist by providing accurate reports accessible online, at any time.

  13. What happens to my credit application details?

    ORIX handles personal information according to a Privacy Policy that is consistent with the National Privacy Principles. With your credit application, you will also be asked to complete a Privacy Act Acknowledgement, Authority and Agreement so we can access personal information about you and, if it proceeds, manage the Novated Lease.

  14. How will I find out about details such as car services, tyre repair and so on?

    You will receive an ORIX Novated Lease Driver's Manual which lists national ORIX approved repairers for maintenance and other services, along with instructions on what to do in the event of an accident. Alternatively, an online version of the manual is available.

  15. Do I need to insure my vehicle?

    Yes, we offer you the choice of our comprehensive insurance underwritten by Lumley General Insurance or your own insurer.

    If you choose a comprehensive insurance policy from ORIX, your premium is fixed for the term of your lease. There is no need to worry about annual renewals or increases, just one premium fixed until your lease terminates. With our comprehensive insurance you will also enjoy no claim bonus protection, personal property coverage and no excess on windscreen claims. For further information about comprehensive insurance with ORIX please contact us, or to request a quote, please visit the Novated Lease Calculator.

    If you choose your own insurer, you will need to provide evidence of insurance before the vehicle is delivered to you and you will be responsible for ensuring the vehicle is kept insured throughout the Lease Term or any extension thereof. Therefore, you must ensure insurance premiums are paid as they fall due. Please also ensure that the insurance policy has ORIX's and your employer's interests noted and that you are covered for any business travel.

  16. Who is responsible for the payment of insurance renewals?

    If you choose comprehensive insurance, your policy is automatically renewed. If you choose another insurer you will be responsible for ensuring insurance cover is renewed and that evidence of renewal is provided to ORIX before the expiry date. Reimbursement for the insurance premium is available from us on proof of payment.

  17. Who is responsible for the payment of registration renewals?

    You will be responsible for ensuring the vehicle is kept registered throughout the Lease Term or any extension thereof. Therefore, you must ensure registration renewals are paid as they fall due. We will reimburse you the expense following receipt of your reimbursement request form and proof of payment. Once reimbursed, the funds will be attributed to your lease budget as an expense. Please contact us on 1300 652 886 for assistance.

  18. Can I add items to my car after delivery and incorporate them in my Novated Lease?

    Once your contract has commenced it will not be possible to add vehicle options. If you choose to add accessories to the vehicle, that will need to be done at your expense with payment up front. It is therefore important that you consider all options and accessories prior to requesting a Novated Lease quotation.

    At the end of the Lease you will also be required to cover the cost of repairing any damage caused by their removal from the vehicle.

  19. How do I know if I am travelling to budget?

    We provide monthly statements detailing actual versus budgeted expenditure including FBT tracking and projection. This allows you to review your nominated usage against any FBT liability.

  20. What happens if I go on unpaid leave such as maternity leave or extended leave?

    If you take any period of extended leave or unpaid leave before the novated lease expires, you and your employer will need to decide what is to happen about the salary sacrifice that has been negotiated. If your employer decides to repudiate the novated lease, as provided for under the novation agreement, we will send you a notice of termination and, thereupon, you will be personally responsible for all future lease rentals plus GST and duty. However, you will not be entitled to an Input Tax Credit for the GST and you will also not be entitled to claim lease rentals and GST as a tax deduction.

  21. If I change employment, can I novate the lease to the new employer?

    Yes, provided your new employer has an ORIX Fleet Agreement and is agreeable to you arranging a novated lease in exchange for salary sacrifice.

  22. What happens when my lease term expires?

    Before the end of your lease, we will contact you to find out what you want to do about the vehicle and, without commitment, any offer you make at that time to re-lease or purchase the vehicle will be considered.

  23. What is my first step?

    Please contact us on 1300 652 886. We strongly recommend that you fully understand the workings of the Novated Lease. For tax and accounting related matters we recommend you seek independent advice from an accountant or taxation advisor.

This Week Only
2010 Hyundai i30
2010 Hyundai i30
2011 Subaru Liberty
2011 Subaru Liberty

Customer Care Line

1300 652 886

Stay in touch