A type of Commercial Lease and Rental Agreement for use between spouses, inter-company transactions, or whenever the need exists to have a legitimate lease arrangement without bank funding.

How does it work? – an Associate Lease is an arrangement where an associate of the employee (eg: family member, friend or family company) owns the car outright and leases it to the employer under an Associate Lease Agreement. The employer then provides it to the employee on a fully maintained basis through flexible salary packaging.

Taxation issues to consider – as with a Novated Lease, under an Associate Lease, the car is recognised as an employer provided car for the purposes of the Income Tax Assessment Act (“ITAA”) and the FBT Act. (See Commissioner of Taxation in Ruling IT 2509). Depending on circumstances, the employee’s associate may or may not be required to register for GST but will be required to obtain an Australian Business Number (ABN) prior to taking out an Associate Lease. Under an Associate Lease, the employee personally will be unable to claim any deduction in relation to the vehicle. However, the employee’s associate will be assessed (for income tax purposes) for the lease payments received from the employer.

End of lease options – if the employee ceases employment with the employer, the employer’s obligation to pay further lease rentals under the Associate Lease Agreement ceases. The employee or the associate will be liable for all future running costs from the date of termination of employment.