Apologies if this has been answered before. Totally honest here, newbie, no technical background in finance and just trying to make head or tail of novated leasing (ecm method). My question is thus. I earn just under $90k and want to lease a vehicle which has roughly the value of about $27k oiver 36 months. I don't drive great distances (about 10k a year, and at a push could go to 15k). I understand that this doesn't then get me far enough to go into the next tax bracket. That said, I have 2 questions. 1) Based on the above - and assume 10k km - which is the more economical an option: a) traditional secured loan or b) lease 2) Assume that km/year are met, either 10/15k. How much fbt would I pay assuming no further claims against my income tax? I know fbt is paid by the employer, but this is where I am confused as I know there is an amount (gains?) I needto pay which the ecm off-sets. Apologies for stupid questions. And.. am aware advice provided here does not substitute that of my taxprofessional but thought I'd ask cheers
I recently got a novated lease car, fully maintained (i presume this is what your talking about?) And must say it is looking to work out good for me. I work in mining, so mates at work can buy a ute, or dual cab and claim the car for work purposes, leaving them to pay for the vehicle completely before tax, meaning no FBT. I however bought a Hyundai Tuscon and am subject to pay 20% of the cars value in FBT. The lease quote i was given explains that if you drive 15-25k km per year, you are subject to 20% FBT. if you drive less then 15k, you pay 26% (not sure if this is a standard thign or not, but these were my quotes) Other things to consider that the FBT that i pay, comes from my after tax money, being paid at my tax rate. If you elect to pay for the car all pre-tax (including the FBT %) you will pay the FBT at 46.5% where-as i pay the post tax contribution part at only 30% tax rate, which works out better for me. To sum up, i borrowed a loan for about 26k, over 3 years and my payments are fortnightly: $384 pre-tax $202 after tax That is fully maintained, everything covered. Hope this helps. I'm with Stratton Finance, they were very helpful.
Novated Lease Hi yfa75, with a novated lease you must travel a minimum of 15,000k per FBT year. If you do not do this mileage don't bother with a novated lease. In answer to question 1 - Firstly do you need the vehicle for work or are you mainly looking to reduce your tax liability. If you do not need the car and if you own a property and or paying one off and you have sufficient equity in the property then I would suggest using the equity in your home to purchase the vehicle. A secured loan or lease/chattel mortgage are similar in structure with the interest rate being the variable. Question 2 - Go the following web site. The calculations are fairly easy to understand. What is the Employee Contribution Method (ECM)? | Novated Lease ECM | Australia | New Zealand - FleetPlus Also just confirm with your employer that they will pay any FBT. Most employers deduct this from the employee. Generally if your employer uses a management company to control the novated lease the FBT calculation is included in your monthly contribution and subsequently paid if you do not complete the number of kilometeres. Hope this helps.
Novated Lease The taxable value (for FBT purposes) on a car purchased for $27K (inc GST) and travelling 10K per year is $7,020. FBT on this is $6740. This FBT payable is reduced by the amount of employee contribution made. To eliminate the FBT, the employee contribution would need to be as much as the taxable value of the benefit. In your case the employee contribution needed to eliminate the FBT is $7020 (inc GST). Your employee contribution is made from after tax dollars and your marginal tax rate is 41.5%. The tax benefit is very minor expecially if teh emplyer charges an admin fee to process teh packaging
1) Based on the above - and assume 10k km - which is the more economical an option: a) traditional secured loan or b) lease. Definitely lease, will increase your bring home money. 2) Assume that km/year are met, either 10/15k. How much fbt would I pay assuming no further claims against my income tax? I know fbt is paid by the employer, but this is where I am confused as I know there is an amount (gains?) I needto pay which the ecm off-sets. Try this novated lease calculator, will tell exactly what you want to know.
