Novated Lease Benefits

Novated Lease Benefits

 

The Benefits of a Novated Lease to you can be measured (tangibly) in Tax & Cost Savings and (intangibly) in Convenience.

 

Tax & Cost Savings

From a taxation perspective, a Novated Lease is paid from your salary package deductions and results in a reduction of your Taxable Income and therefore the amount of income tax you pay.

By salary packaging all of the car lease and running costs, you can have some fantastic tax savings. This is because FBT is calculated on the value of the car rather than on what is spent on the car.

Also, in most cases, the use of the Employee Contribution Method gives an even better taxation result. With this, Income Tax and Fringe Benefits Tax is saved through the structure of the Salary Deductions.

As an example, the following table shows the impact of a Novated Lease on the salary package of a person earning $70,000 per annum. They are leasing a new medium sized car over a 4 year period and travelling about 20,000 kilometres per annum.

 

 

Regular Salary

Salary Packaging
(No ECM)

Salary Packaging 
(ECM)

Salary

$70,000.00

$70,000.00

$70,000.00

Pre Tax Deduction

$0.00

-$12,243.87

-$7,530.77

FBT Deduction

$0.00

-$5,068.76

$0.00

Taxable Income

$70,000.00

$52,687.37

$62,469.23

Income Tax

-$14,296.68

-$8,670.87

-$11,849.17

Medicare Levy

-$1,400.00

-$1,053.75

-$1,249.38

Post Tax Car Cost

-$13,468.04

$0.00

-$5,184.41

Net Salary

$40,835.29

$42,962.75

$44,186.27

 

The above calculations are indicative only and won’t necessarily be the same as your own Novated Lease however it does reflect the true impact of a Novated Lease on the salary package of a person earning $70,000 per annum.

In this case, by salary packaging a Novated Lease and using ECM, there are annual savings of $3,350.98 in comparison to paying all of the finance and running costs of the car from after tax salary.

This equates to a whopping $13,403.92 over the 4 year lease period.

In addition to the Income Tax and FBT benefits, a Novated Lease also has some GST benefits. Because you Salary Package a Novated Lease, you don’t pay GST on:

  • The original car purchase price
  • Lease repayments
  • Fuel 
  • Service and Maintenance
  • Tyre Replacements
  • Other car expenses

The result of all this is that salary packaging a Novated Lease can save you thousands of dollars every year. The amount of these savings depends on your individual circumstances therefore we suggest you contact us to have a tailored calculation done for you, free of charge and without any obligation to proceed.


Convenience

As you can see from the previous section, the Tax and Cost Savings with a Novated Lease are enormous, but equally as important but much less measurable are the convenience elements of a Novated Lease.

With our Novated Lease arrangements, you benefit from:

  • Salary deductions for all of your car costs
  • No surprise car expenses
  • Inclusion in our car maintenance program
  • Using our supplied fuel expense card
  • Our car expenses management program
  • On line reporting

We track all of your car expenses and continually track them against the budgets we established with you at the start of the lease.

We also take care of all of your salary deductions directly with your employer and then pay the amounts required for the car, including lease payments, fuel payments, service costs, insurance premiums, etc.

With our Novated Lease, there’s no more worrying about how you’ll afford your car costs when they all arrive at the same time as the school fees or rent or contents insurance.

Get in contact with one of our specialists and you’ll be pleasantly surprised with what we can include and manage for you.