Swerv-o

That's all very well, but you have to have an employer that is willing to pay the game, and not everybody does...


S

jayr

But an awful lot of people do, it's a tax thing not a "perk" and is in theory available to all employees, certainly has been at all companies I've worked for.

Swerv-o

Yes, it should be, but ultimately it's down to the company to administer, and if they perceive it as being too much bother then they don't have to.


S

inOz2008

With 7 weeks to go I am in the middle of this dilemma (and sinker deeper with everything else to think about!) - to lease or buy (possibly used as opposed to new).

Does anyone know where I can find a dummies guide to novated lease in conjunction with what it means wrt tax that I do/don't pay? Or be kind enough to explain how this works?

My hiring manager did suggest this option was available to me but also said it only works in my favour if I travel a certain number of total (business + personal) kilometers per year (<15k km's per annum not good, >25k km's good...though not sure what it means or whether the middle band between 15 and 25 matters or not!?)

Can anyone provide any good advise/pointers?

jayr

I'll try to find some links.

Novated leases appear complex when you are not familiar with the Australian tax system I'm afraid.

Firstly, if you take some non cash items in your pay package (such as a novated lease) you will not pay income tax on that proportion of income. HOWEVER, in its place you will Fringe Benefits Tax (FBT).

The standard rate fo FBT is 48.5%. HOWEVER, some items are FBT free (i.e. 0% or no tax) and some items attract different levels of FBT.

It is only worth having non cash items if the FBT rate on that item is less than your MARGINAL INCOME TAX rate.

With a novated car leae, things including petrol, insurance, maintenace and registration have an FBT rate of 0%. That means your saving is equivalent to your marginal income tax rate. Lets say those items added up to $5000 per annum and your marginal income tax rate is 30%, you would save $1500 of tax.

The actual LEASE PAYMENT does attract FBT but at concessionary rates (i.e. less than 48.5%). The FBT rate depends on the KMs travelled in one year.

There are different methods of calculating the FBT but a typical one id the STATUTORY METHOD. This method does NOT require travel for business, all travel can be personal private use.

You are obligated to provide an annual ststement of you KMS on the speedo every 31 March (the FBT year runs April March, the tax year runs July to June).

If you have travelled less than 15,000km in one FBT year then your lease payment will be based on the highest level of FBT which is 26%. Travel 15 to 25KM and the rate is 20% 25 to 40KMs is 11% and above 40KMS is 7%.

SOOOO, if your MARGINAL INCOME TAX RATE is say 30% then you STILL save tax (though only 4%) and you still save 30% on your petrol, maintenace,rego and insurance.

Separatley, under a lease the car will be bought at lease car prices, not retail prices, you may well save $5000 relative to walking into a car yard. Additionally, in a 3 way lease you do not pay GST (think VAT though the rate is 10%) as your employer receives something called an INPUT TAX CREDIT.

You may choose a period over which to make payments (say 3 years). At the end of that time you make a final (balloon) payment if you wish to buy the car, that can be financed over another time period if you wish or you can sell the car privately if private sale is worth more than the balloon( which it typically, though NOT ALWAYS is). With many providers you can also just hand the car in with no further payments.

Try this guide from LEASEPLAN (my provider) http://www.leaseplan.com.au/forms/us...m)_oct2007.pdf

obiwan

for maintenance and rego as well as insurance, i would not mind paying for that...i am hoping since it would be a new car, there would not be much repairs needed in the first 2 years....

tictac

Your hiring manager is correct

You have to be sure you're going to do the k's (business or private) otherwise you face getting smacked with a hefty FBT bill

We saw an accountant about this and he advised us of the above.

The other downside is that if you move jobs you have to hope that your new employer is willing to take-on the novated lease otherwise you face having to make the payments to the leasing company yourself *including* the GST element that your previous employer absorbed for you

If you don't feel the need to *own* a car and like to be able to swap and change every few years or so then finance leases (or PCP's as they are known in the UK) meet your requirements

Check out BMW finance to get an idea of what your payments will be http://www.bmw.com.au/scripts/main.a...=15718&PID=150

jayr

It is misleading to suggest that the FBT bill will be high. The highest FBT rate applies for use of 15,000km pa and less and is 26%. That rate is less than a typical marginal income tax rate of 30% and therefore represents a saving.

Given that packaging fuel, rego, insurance,tyres and maintenance is fairly standard and all of these items have an FBT rate of zero (irrespective of mileage) there are substantial savings to be made packaging a car.

waliam

Any idea if it is possible to get novated lease for a vehicle model 2004, Thanks