Novated lease - standard Vs fully maintained

[gareth_oau]

I think we have the best arrangement. my employer buys the car outright, then depreciates it over 8.5 yrs, and I just refund them the depreciation per month - its effectively an 8.5 yr interest free loan

[monkeyalan]

I think we have the best arrangement. my employer buys the car outright, then depreciates it over 8.5 yrs, and I just refund them the depreciation per month - its effectively an 8.5 yr interest free loan

thats what they were doing until a few years ago when they bought an IS250 lexus for someone who then left 3 months later leaving them with the car!

[zenra]

Hey Monkeyalan,

Lets start off with the basic's.
Most people can not claim a tax deduction for their car at the end of the tax year.

However a novated lease is where your car is paid for through your salary. And the Australia Tax Office nicely allow you to not only get a reduction on the tax but also for your employer to claim back the GST on your car expenses.

Lets think about this on a different line, on your way home go by $110 worth of fuel.
How many hours of work do you have to do... to then pay tax... finally leaving you with the $110 to spend on fuel.

Under a novation, the same $110 of fuel only costs you $100 (employer gets the GST back), and half of the $100 is coming from your pre tax and half from your post tax wages.

So, hard stuff like maths now.
Lets say you normally would pay 30% tax on the $50 pre tax, being a saving of $15 + the $10 GST. Wow, in rough numbers your novation saved $25 on one tank of fuel.
Do that 52 times a year (okay smaller tanks), but seriously, RACQ survey said even a Volkswagen Golf 90 Tsi Trendline Twincharger 1.4L DSG 5dr Hatch costs around $9,150 a year to run RACQ survey, so its always worth checking if a novated lease could work for you.

Our experience shows that someone full time employed and drives a car, should see a benefit through a novation.
But until we do samples, of car price, term, salary, annual kms.... we don't know how much of a benefit.

We always include all the costs of running the car inside a novation so that when you get paid, guess what no more opening the wallet for car costs. Plus, we want to maximise that reduction of tax on your pay.

Better still, jump in and do some samples yourself... Zenra Calculator.

More than happy to discuss or send us a pm

Zenra

[zenra]

I think we have the best arrangement. my employer buys the car outright, then depreciates it over 8.5 yrs, and I just refund them the depreciation per month - its effectively an 8.5 yr interest free loan

I agree it would work out to be an interest free loan, but every cost is coming straight from your wallet, plus isn't there a double stamp duty issue? Your employer pays the stamp duty on the purchase (which your paying back) then they have to sell the car to you, incurring a second lot of stamp duty?

I also think that if the employer looked correctly, you are also receiving a Fringe Benefit which they would have negate too?

[The_Hawk]

From what I understand my lease breaks down like this:

I pay an amount out of my wage pre tax each pay which goes into "an account". This account is then used to pay the lease payments and is otherwise sitting waiting to pay for fuel/servicing etc. The amount that gets taken each pay is calculated based on how many km's I say I will do with an estimate for fuel use, tyre wear, servicing, rego, insurance etc etc. I can choose to have more taken out if I think I will need extra's.
What does vary from lease company to lease company is what they will allow you to spend your money on. Some will allow for *some* modifications, most wont. That said, replacing a worn out set of discs and pads with upgraded parts is often fine. Same would go for suspension... but then it's a new car so trying to say your new coils were replacing the broken old suspension could be a push

I can go anywhere I like for anything, some places will use the 'magical card' which goes directly to my account, other places I can pay out of my own pocket and claim back.

Again, from what I understand the reason they take some cash pre tax and some post tax is to offset the fringe benefits tax (FBT) you would otherwise be liable for.

As for how many KM's you need to do. It worked out for us that on a $50k Multivan that moving from 15,000km to 30,000km per year will only cost me $20 / fortnight more because my FBT tax rate drops from 20% to 11%

As for interest rate, mine was fixed for the life of the lease and was competitive (although not the best) with personal loans.

Oh, lease companies tend to get a better price than you will since they may get corporate or volume discounts (although I had the option to negotiate my own price directly with any dealer if I wanted to). You also don't pay GST which is another saving

[zenra]

Again, from what I understand the reason they take some cash pre tax and some post tax is to offset the fringe benefits tax (FBT) you would otherwise be liable for.

Correct, so FBT is the established by the percentage, (0-14,999kms = 26% 15,000 -24,999kms = 20% 25,000-40000kms = 11% and 40001kms and up = 7%) * the GST incl cost of the vehicle (exclude rego\ctp and Stamp duty). This amount is the proportion that is taken as a POST tax deduction

You also don't pay GST which is another saving

You don't pay GST on the transactions, correct.
However, while ever a novated lease ie paid by the employer you don't pay GST on the transaction including the finance repayments but the residual you will pay GST on.

[zenra]

IS250 lexus for someone who then left 3 months later

OUCH to the employer

[brad]

thats what they were doing until a few years ago when they bought an IS250 lexus for someone who then left 3 months later leaving them with the car!

i can top that. My mates employer bought him an expensive Bimota motorcycle & he left 6 months later after an argument with his boss. Nobody else in the company could ride a motorbike.

[gareth_oau]

I agree it would work out to be an interest free loan, but every cost is coming straight from your wallet, plus isn't there a double stamp duty issue? Your employer pays the stamp duty on the purchase (which your paying back) then they have to sell the car to you, incurring a second lot of stamp duty?

I also think that if the employer looked correctly, you are also receiving a Fringe Benefit which they would have negate too?

oh what can I say Zenra - they really like me . they pay all FBT, stamp duties, GST and operating costs.

My recengtly acquired RS4 is costing me the equivalent of about $500 out of pocket per month

[zenra]

oh what can I say Zenra - they really like me . they pay all FBT, stamp duties, GST and operating costs.

My recengtly acquired RS4 is costing me the equivalent of about $500 out of pocket per month

Thats great
Question for you, the $500 is just repaying the RS4 loan? You're are paying out of your pocket for the rest of the costs from your wallet?
Have you sat down and had a look at a novated lease for RS4. You might be surprised at what it would put back in your pocket?

Would love to do a quick and dirty impact analysis, if your interested, pm me.

Zenra

[zenra]

Bimota motorcycle

Quick, give me the bosses number and I'll buy it lol

[brad]

Quick, give me the bosses number and I'll buy it lol

This was ages back. It was a DB1. When everyones tempers had cooled a bit, my mate went back & bought it off them for a very nice price (bastard).

[stucam]

GST passed onto the employer is classed as an input and therefore is claimable.


Sent from my iPhone using Tapatalk

[gareth_oau]

Thats great
Question for you, the $500 is just repaying the RS4 loan? You're are paying out of your pocket for the rest of the costs from your wallet?
Have you sat down and had a look at a novated lease for RS4. You might be surprised at what it would put back in your pocket?

Would love to do a quick and dirty impact analysis, if your interested, pm me.

Zenra

Hi Zenra, perhaps you misunderstand - my total cost is $1000 pm before tax, with the company picking up all other expenses (including maintenance fuel rego etc etc) - at the end of the depreciation, the car is given to me for $0 and the company picks up any stamp duty, GSt, FBT etc on the handover also.

I suspect the interest alone payable on a novated lease for a $100k car would make my case far more attractive