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Hi @sachd
When you move the vehicle under a novated lease, the employer becomes the owner. You're effectively selling the car to your employer. There's no GST on the price of the car because you're an individual.
When you get to a residual payment, you're then purchasing the vehicle from your employer. They will charge you GST where they're registered for GST. This is because they're making a supply for payment, so they must charge GST.
This would happen no matter what you sold to your employer and then bought back from them.
Ordinarily, a novated lease itself won't include GST, but the residual payment still would. This is because your employer claims the GST portion back on their activity statement. However, because they aren't purchasing the vehicle from a business (rather, from you, the individual), there's no GST portion.
You can read about GST and vehicles purchased under novated leases on our website.
All replies
Hi @sachd
When you move the vehicle under a novated lease, the employer becomes the owner. You're effectively selling the car to your employer. There's no GST on the price of the car because you're an individual.
When you get to a residual payment, you're then purchasing the vehicle from your employer. They will charge you GST where they're registered for GST. This is because they're making a supply for payment, so they must charge GST.
This would happen no matter what you sold to your employer and then bought back from them.
Ordinarily, a novated lease itself won't include GST, but the residual payment still would. This is because your employer claims the GST portion back on their activity statement. However, because they aren't purchasing the vehicle from a business (rather, from you, the individual), there's no GST portion.
You can read about GST and vehicles purchased under novated leases on our website.
Hi Blake/ATO Team,
Hoping to pick up this thread/conversation again. Am I correct to understand from the above that GST is not applicable on the residual in the scenario where the car was not purchased from a business but rather placed on a novated lease after the vehicle was owned outright by an individual?
Thanks!
If the person or business you're paying the residual to isn't registered for GST then they can't collect GST. So it wouldn't be charged.
Hi Blake, ATO Team,
Could you please help clarify?
If I take on a 5-year novated lease for a new vehicle which costs $55,000 (Inc GST), the Residual Value at the end of the lease term is 28.13% of $55,000 = $15,471
To purchase the car from the lease company (which is GST Registered), Does the $15,471 include GST or does an additional 10% need to be paid on top of the $15,741 ?
Hi @Ulearn,
The residual value owed $15,471 on the car includes the GST.
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