Novated Leases are a predominantly Australian lease agreement that is three way between an employer, employee and lease finance company. The employee leases a vehicle from the lease company, and employer agrees to take on the employee’s obligations under the lease. Thus, the employer often makes the lease payments on behalf of the employee. Often it is referred to as salary packaging a vehicle.
Disclaimer: As there are multiple types of Novated Leases and calculation methods you must seek specific advice from your accountant or bookkeeper before relying on this support note. If you have received specific advice as to how it should be accounted for you can contact our team to learn how to capture the accounting entry in Saasu. We ask that you then check this with your advisor once you have added the entry into Saasu to be sure they are satisfied.
When a PAYG employee has a Novated Lease there are often two deductions. One being from Gross Pay and the other being deducted from Net Pay. In Saasu the structure of our payslip layout doesn’t provide for a Deduction to be listed below the Net Pay/Banked total. To ensure the employee understands the second Deduction is after Net pay we must create a Pay Item labelled as such and include it in the Deductions section of the payslip also. Tick this Pay Item as “Taxable” to ensure the money is treated as having being taxed already and is being deducted from Net Pay.
The following example is where the Novated Lease payment would be $900 per fortnight. Split being $500 from Gross Pay and $400 from Net pay.
- Create an Account called Liability: Novated Lease Payable
- Create a Purchase with the Novated lease finance companyfor $900 selecting the Account to be Liability: Novated Lease Payable.
- Create Deduction Pay Item called Novated Lease (from gross pay)
- Create Deduction Pay Item called Novated Lease (from net pay)
- Enter the payroll transaction for your employee.
- Note that you may also have a GST component that might be included in the Deduction section. For example Deduction: Employee Contribution GST
- See also > Institute of Certified Bookkeepers Novated Leases guide.
- See also > Australian Taxation Office information about Vehicles purchased under novated leases.