Car running costs including maintenance and fuel expenses

Slash Car Running Costs with Salary Packaging – Learn How!

For employers, offering attractive benefits is a powerful way to attract and retain top talent in an increasingly competitive market. One such benefit is the ability to salary package car running costs, a tax-efficient option that helps employees save money on everyday vehicle expenses. As an employer, facilitating this perk not only boosts employee satisfaction but also strengthens your company’s overall benefits package—all without additional cost to your business.

In this guide, we’ll explore how employers can enable salary packaging for car running costs, the benefits it brings to your staff, and the simple steps to get started.

What Does Salary Packaging Car Running Costs Mean?

Salary packaging car running costs is part of a novated lease arrangement. A novated lease is a three-way agreement between an employer, an employee, and a finance provider. Through this arrangement, employees can package their car lease payments and running costs—such as fuel, servicing, tyres, registration, and insurance—using pre-tax income.

For employers, facilitating this process involves setting up payroll deductions and managing a simple administrative process with the finance provider. The best part? It comes at no direct cost to the business.

Why Employers Should Support Salary Packaging for Car Running Costs ?

Facilitating salary packaging for car running costs offers significant advantages, both for employees and your organisation.

1. Boost Employee Satisfaction

By enabling employees to save money on their car expenses through pre-tax payments, you’re effectively offering them a valuable financial benefit. Employees see this as an enhancement to their overall compensation, leading to increased job satisfaction and loyalty.

2. Enhance Your Employee Benefits Offering

Large companies often offer novated leasing as part of their benefits package. By doing the same, you level the playing field when competing for talent, particularly in industries where salary packaging is a standard perk.

3. No Cost to Your Business

The costs of the novated lease, including running costs, are deducted from the employee’s salary. Employers don’t bear any financial burden—your role is simply to facilitate the deductions.

4. Simplify Administration

When working with providers like One Car Group, the administration process is straightforward. Providers handle the majority of the setup, invoicing, and payments to suppliers, leaving you with minimal ongoing management.

5. Attract and Retain Top Talent

Offering novated leasing and the ability to salary package running costs gives your company a competitive edge. Employees are more likely to stay with a company that provides meaningful financial benefits.

What Car Running Costs Can Be Salary Packaged?

Through a novated lease, employees can package a wide range of car-related expenses, including:

  • Fuel and Charging Costs: All costs for refuelling petrol or diesel vehicles, or charging electric vehicles (EVs).
  • Servicing and Maintenance: Routine servicing and any necessary repairs.
  • Registration and CTP Insurance: Both compulsory and optional car-related insurances.
  • Comprehensive and Third-Party Insurance: Protecting the car and other drivers on the road.
  • Tyres: Replacements and repairs.
  • Roadside Assistance: Membership and service costs.
  • Car Washes: Some novated lease arrangements even cover detailing services.

By bundling these costs into pre-tax payments, employees enjoy significant savings while simplifying their budgeting.

How Does Salary Packaging Car Running Costs Work?

Here’s how the process works when an employer facilitates salary packaging for car running costs:

1. Employee Enters a Novated Lease

The employee selects a car and enters into a novated lease agreement with a finance provider. This lease includes running costs, which are bundled into the total lease amount.

2. Payroll Deductions Begin

As the employer, you deduct the lease payments (including running costs) from the employee’s pre-tax salary each pay period.

3. Finance Provider Handles Payments

The finance provider uses these payroll deductions to pay for the car lease and running costs, including fuel, servicing, and insurance. Employees no longer need to manage these expenses separately.

4. Reporting and Reconciliation

Providers like One Car Group supply regular reports and reconcile payments with the employer, ensuring the process runs smoothly.

5. Employee Enjoys Savings

Because the deductions are made from pre-tax income, employees save on both income tax and GST for the included running costs.

How to Get Started as an Employer?

Facilitating salary packaging for car running costs is simpler than you might think. Here’s how to get started:

Step 1: Partner with a Novated Leasing Provider

Work with a trusted novated leasing provider, like One Car Group, to establish a seamless system. They’ll manage most of the process, including setup, employee education, and ongoing administration.

Step 2: Educate Your Team

Inform employees about the benefits of salary packaging car running costs. Many employees may not be aware of the potential tax benefits or how easy it is to get started.

Step 3: Update Payroll Systems

Set up payroll to accommodate pre-tax salary deductions for novated leases. Your leasing provider will supply all the necessary details to ensure accuracy.

Step 4: Promote the Benefit

Include novated leasing and salary packaging as part of your employee benefits package. Highlight it during recruitment to attract top talent.

Common Employer Concerns About Salary Packaging

Not at all. Novated leasing providers like One Car Group handle the majority of the administration, from invoicing to supplier payments. Your role is limited to managing payroll deductions.

The novated lease is portable, meaning the employee can take it to their next employer or assume the payments themselves. Your business is not responsible for any further obligations.

No. The lease and associated costs are fully covered by the employee’s salary deductions. There are no out-of-pocket costs for the employer.

Why Choose One Car Group for Novated Leasing?

Partnering with a provider like One Car Group ensures that salary packaging for car running costs is easy to implement and manage. Here’s why employers trust One Car Group:

  • Comprehensive Support: They handle setup, administration, and employee education, leaving you with minimal involvement.
  • Tailored Solutions: Packages are customised to suit your business and employee needs.
  • Expert Guidance: From initial setup to ongoing management, their team is there to guide you every step of the way.

Conclusion

Salary packaging car running costs is a win-win for employers and employees alike. For employees, it’s a tax-efficient way to manage vehicle expenses, offering significant savings. For employers, it’s a low-cost benefit that boosts job satisfaction, attracts top talent, and enhances your overall benefits offering.

Ready to implement salary packaging for car running costs in your organisation? Contact One Car Group today to get started and offer your employees a benefit that truly makes a difference.