Novated Lease "TAX" Changes effective immediately.

[gtfpv]

What if i buy it and sell it than buy a 2010 model and lease it i may be better off doing that

[mash85]

so long as the used car u purchase hasn't been leased via your employer before, then the fbt base value will be based on the market value of the car

[Crazy Dazz]

Getting tax advice from your mates seems to be a great Australian institution.
Salary sacrificing a vehicle is only beneficial when the total cost using the statutory method is less than it would otherwise be using only operating costs. So if you have you own business, you want your company to buy cheap vehicles (meaning a small taxable value), and then pay all the fuel, maintenance, and repair costs.
“20%” has nothing to do with the tax rate and nothing to do with how much you use the vehicle. It’s not fair and its not reasonable. If you were an employer using ONLY the statutory methods, the tax act allows you a deduction of 12% of the value, but then says the value of the fringe benefit is 20%. (But it is what it is, and is still beneficial when the value of the vehicle is low.)

The biggest problem with Novated Leases is that the examples showing you how much you “save” are based on the ludicrous presumption that without the salary packaging you would still choose to lease your vehicle at the outrageous rates the finance company is proposing. I recently looked at one proposal, did a few calculations to back-calculate the interest rate, and discovered the finance company was trying to charge 27% interest.

I am a Registered Tax Agent, and CPA with 20+ years expereince in FBT. If anybody wants some free specific advice, please PM me.

[gtfpv]

Crazy daz . Im on a mobile now but i will pm you soon for Advice thanks . I can visit and pay you also if you are in sydney for some taylored advice

[PepeLePew]

I've novated new, and novated used. In the over 25k bracket. My best results were a well selected near new 1 to 2 yr old vehicle. All I see now are my fellow novaters rethinking doing it again. Anything to me which could impact new vehicle sales and send any proportion of these guys back to used cars is madness in today's conditions. Is this to placate the environmental front? Because I don't see how it can help our already shrinking car industry.

[jjw]

Its not about the car industry, its about plugging up leakage in the tax system - ie Wayne wants us all to pay more tax.

Impact on new car sales is an unintended consequence if people choose to retain or purchase second hand vehicles and the average age of the car fleet increases somewhat.

Anyhow, I'm of the view that the old system was flawed and this is a step in the right direction. Wonder when they'll have a go at negative gearing...;)

[davocol]

Spot on crazy Dazz, I did the sums in the last year going through my only option working for a large retailer for salary sacrificing and their interest rates were just nudging 20% They were marginally better than doing it myself but if their interest rates were reasonable it would have been far better, how they get away with it is amazing. Absolute rort.

Originally Posted by Crazy Dazz

Getting tax advice from your mates seems to be a great Australian institution.
Salary sacrificing a vehicle is only beneficial when the total cost using the statutory method is less than it would otherwise be using only operating costs. So if you have you own business, you want your company to buy cheap vehicles (meaning a small taxable value), and then pay all the fuel, maintenance, and repair costs.
“20%” has nothing to do with the tax rate and nothing to do with how much you use the vehicle. It’s not fair and its not reasonable. If you were an employer using ONLY the statutory methods, the tax act allows you a deduction of 12% of the value, but then says the value of the fringe benefit is 20%. (But it is what it is, and is still beneficial when the value of the vehicle is low.)

The biggest problem with Novated Leases is that the examples showing you how much you “save” are based on the ludicrous presumption that without the salary packaging you would still choose to lease your vehicle at the outrageous rates the finance company is proposing. I recently looked at one proposal, did a few calculations to back-calculate the interest rate, and discovered the finance company was trying to charge 27% interest.

I am a Registered Tax Agent, and CPA with 20+ years expereince in FBT. If anybody wants some free specific advice, please PM me.

[gtfpv]

i know the interest rates are high , but i always felt quite infront leasing .
my net out of pocket weekly expense was $240 , $100 of that was going towards fuel , $20 for rego $20 for insurance $15 for tyres and $10 for maint , plus $2.50 redundancy cover and $2.50 for replacement car cover if the car is off the road . thats $170 in running costs . which left $70 per week for finance on $34000 after 3 years the residual of $16300 , means its was definately infront leasing versus private .
if i took out an 9% car loan over 5 years , and i would have to have paid
$162 per week for finance and would owe $16000 now also
so 162 -70= 92 . thats $92 per week i saved over 3 years . SO TO have the same bottom line after 3 years leasing was $240 pw , privately buying would 've been $332 pw.

so leasing has brought me $14300 in front over 3 years . . those savings have now been taken away on new cars and the savings would be closer to $40 per week at 20% FBT on a new vehicle .
so it is still better to lease , even at 20% .
however in my case re leasing my car would double the FBT CLOSER TO 40% in comparable terms , so in my case re leasing my xr6 has no benifit , i 'm better off buying it .

however , i seem to think now , if i buy my xr6 at lease end , and sell it , and buy another car exactly the same and lease it , it becomes tax effective with benifits again , as it is deemed a new lease , rather than a lease extension .
stupid , but i'm just giving the figures i have worked out on .

[jimmyxr6t04]

Very interesting... I didn't realise that if i re-leased my current car after the 2 year lease that i'd still be paying FBT on the original purchase price... I suppose if i had taken a 4 year lease, i'd be paying FBT on the original purchase price for the 4 years. I guess it does make some sense that i should pay FBT on the same price if i decide to extend my lease from 2 to 4 years on the exactly the same car.

Had i known that the FBT would remain 20% of the original purchase price it may have swayed me into a different car or a longer lease... I will more than likely go a different car at the end of this lease now.

[PepeLePew]

I find the hidden benefit of leasing is getting new cars past the missus, makes it all worthwhile. 'Its part of my package love'. A priceless factor that should not be ignored.

[graham_h]

Originally Posted by SB.1

The "if you don't do 25,000 kms then it is not worth it is one of the biggest myths going around". The 20% applies to the base value (essentially the GST inclusive cost) of the vehicle. If you choose a cheaper vehicle, or second hand vehicle then you can still come out much better off than buying the car yourself. You still get all of the running costs out of your pre-tax.

The other thing most people are not aware of is that you get to keep the surplus of your sale price over your residual and you get that tax free. This makes shorter term leases very attractive especially where you are buying second hand.

I have mainly done 1 year leases in the past (as you get a 65% residual). So if I buy a $20K 2 year old Berlina, I only owe $13K on it in 1 year's time. If I sell it for $16K I pocket the $3K tax free. That $3K will pay for a significant proportion of the following year's lease payments (after tax) on a replacement vehicle.

Additionally the 20% FBT is only based on $20K (so $4K), so I'm a lot better off than the bozo who paid $40K for one new on a 3 year lease and is still paying FBT on $40K (20% = $8K) on the exact same vehicle in Year 3.

Still lots to be had out of novated leasing, you just need to be clever about it and get good advice from an accountant.

Can you PM me details of your accountant or lease company please.
Wanting to do this with a two year old XR6. Makes alot of sense to me

[davemcgoldrick]

I recently moved from the UK to Melbourne and was a little confused with the whole novated lease thing. I've always had a company car in the UK and never heard the term novated lease before. Any way I found a novated lease company which I would definitely recommend. They've been working with my present company for years but have been really helpful since day 1

[davemcgoldrick]

Oh I would definitely recommend watching the "Flip your thinking" video. Explains everything pretty well.