Novated Lease Payment - Set Up Account/Line Item

Question

Hi Team,&nbsp;Our company recently had an employee set up with a Novated Lease arrangement, which is new to us and I don't have much knowledge about it.&nbsp;The Novated Lease is managed by a third party, and they send us a payroll advice and an invoice. Do I need to create a liability account on the balance sheet, for example, "2XXX-Novated Lease Clearing"?&nbsp;The payroll advice contains a pre-tax salary sacrifice amount. As I understand, this is different from superannuation salary sacrifice. Should I create a new pay item liability for this pre-tax salary sacrifice, with the ATO category being "Salary Sacrifice Other"?&nbsp;I assume this pre-tax salary sacrifice should then go to the GL Account 2XXX-Novated Lease Clearing, to clear out the balance sheet account.&nbsp;I would appreciate any help on this matter.Thank you so much.

isaiah_c · Accepted Answer

Hi Jsch,&nbsp;
&nbsp;
Thank for the post. I understand that you're setting up a novated lease arrangement for an employee, which can be a bit new and complex. Here's the&nbsp;link to help you set it up.
&nbsp;
Regards,
Sai

bullswool · Answer

Hi, firstly let me preface this by saying I'm more of a payroll person v. an accountants person.

You are correct, novated lease salary sacrifices are different to superannuation salary sacrifices.

Salary Sacrifice Other (O): When the employee agrees to have part of their Pre-Tax Salary paid towards other non-cash benefits (i.e. a Novated Lease)
Salary Sacrifice Superannuation (S): When the employee agrees to have part of their Pre-Tax Salary paid into a Superfund of their choice

Is it only pre-tax, no post-tax? Any post-tax deductions for the lease wouldn't need an STP2 code.

Only union fees (F), child support payments (D or G) and work place giving (W) are reportable deductions for STP2.

Regarding the accounts side of things: yes, I think it should be a clearing accounts. You deduct from the employee and would pay over the full amount to the leasing company on a monthly basis (or when they issue you an invoice).

jsch · Answer

Thank you so much. This is really helpful.

jsch · Answer

Thank you so much.

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Novated Lease Payment - Set Up Account/Line Item

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