Novated Leases

Just depends on SO many things.

Novated Leases are common , so that in itself is no big deal.

It will work for some and not others.

What sort of Salary ???

Depends on your circumstances , but generally , over $50k seems about the spot.

Best idea is to chat to your accountant , because if you get it wrong , it can cost you heaps.

My employer offers this kind of lease seems a good idea can be very expensive though on that sort of vehicle as a novated lease generally covers all operating exspenses which you claim b4 tax anyway but your yearly salery is still shown as the total amount earnt for the year ie if you want to reduce your taxable income for anyother purpose {child maint,fam tax benefit} etc a novated lease is not the way to go .If you go to the lease plan web site they have a simulator for each vehicle and amount of ks travelled ,it alsoi shows the tax savings as well when it asks for employer code etc just put in any number it just has to filled out based on a 50k vehicle and 30-40k per year would expect they payments to be around 350-400 per week ..

I am seeing figures in the order of 22-23K per annum for Novated leases on Prados etc. FBT is a large part however, and if you use the statutory method make sure you hit your targets,,eg 25k kms pa. If you live close to work and do heaps of work travel then use the "operating method" and get the FBT cost right down by using a log book for 3 months.

Another option may be a commercial such as Hilux. If its tool of trade and it's not used for private purposes!!!! then there is no FBT and it's only operating costs you are paying for. Lease for 2 years and sell privately and keep the "gain". May get away for under $15K pa. In any event it is a lease and you will be responsible for payments even if you have lost your job...barring special arrangements of course.

Do the maths, ask heaps of questions and trust no one.

You can win or lose with a novated lease. The important thing to remember you are transferring the way tax is calculated from the marginal rate method i.e 30c in the dollar to paying fringe benfits tax. The rate of FBT for cars is calculated as a % of the capital value of the car. The % drops as you do more mileage, less than 25K the rate is 22%, 25Kto 40K is 11% and over 40k it is only 7%.

The secret i reackon is in the mileage, if you do more tahn 40K then 7% of the capital value is definitely a lot better than 30% tax(minimum).

The other area of possible problem is depreciation. When you sell the vehicle if the lease residual is greater than what you trade it in for you have to make up the difference (out of after tax dolars) if the residual is less than trade in you get to keep tax free the profit. Therefore you need to get a car that has low depreciation. Four wheel drives are in this category. Stay away from new 2wd's, if you want a 2wd get a late model 2nd hand. That way you are not paying for new car depreciation.

You want low depreciation and need to do high milegae to win.

From the sums I did before I leased: need to be in the top 2 tax brackets (top is moving to 125000 next year, which may have an effect) and need to do at least 25000 k's a year. Bonus at the moment you can get upto 47% off the price of fuel.

Only dodgy if you get it wrong... ie. your salary and the K's you intend to travel...

There is a cap on what you can spend, then it becomes a "luxury car" and the rates all change. Not sure if the cruiser crosses the line, fairly sure the Patrol is OK.

Lease Plan, who run my lease, recommend no less than 60k salary to make it work.

Mt Triton costs me $1393/month(pre tax) actually out-of-pocket cost is around $640/month... This includes tyres, servicing, insurance, fuel, rego etc...

As already stated, talk to your accountant...

There are a number of questions and factors that will determine your decision prior to looking at a NL

Do you need to purchase a vehicle - dont do it just because you can do a NL
How would you finance it if you dont do a NL - Cash, Personal Loan, HP eg if you have the cash to purchase outright,you may be better off - If you were going to do a Personal Loan, NL may be better
Who do you work for - some employers are given special consideration by ATO eg many schools and hospitals. Could you do the vehicle in your partners name?
The lower the purchase price - the better
The more kms you do - the better
The higher your salary - the better
Does your employer offer the services of a "bureau" service to manage the process - if so, contact them.
Do you have a Financial Planner or accountant. Ask them how many clients they have advised in the past 12 months in relation to NL
Most comments above are correct

As stated by many, it really comes down to the kilometres you travel, anything less than 25k's a year and it probably isn't worth it.

Something worth considering though is that the fleet manager will most likely purchase the vehicle and therefore the price you obtain will most likely be far better than what you could achieve on a personal basis.

You would probably need to option the vehicle at the purchase time not afterwards, because technically you won't own the car the lease company will.

Regards

First piece of advice I was given before engaging in a novated lease

SPEAK TO A FINANCIAL ADVISER....

I don't suppose th respondents in this forum hold such credentials....

It would be very foolish to base a financial decision on the opinions of lay people...

Not everyones financial and salry situation is the same...

What are the maintenance arrangements? Forinstance I get discounted fuel (using fuel cards and pay no GST on the discounted fuel price.

So for me it is win win

So seek the advice of an expert

How does that ad go......"buy a race horse and then...."

I haven't done it, however a lot of people at my work have. After looking at all the figures one thing they all seem to say is. If you are going to BORROW money to buy a new car, it is better to least one. Don't buy a new car just because you can get a novated lease, only do it if you were going to get this vehicle regardless. Its better if you do at least 25000 km's a year. As said above go to the experts

I have a novated lease on a 100 series v8 2004 landcruiser and am doing over the 25k p.a but under 40k so am sitting in the 11% FBT.

The car is costing me about the 22k mark p.a at present out of before tax dollars.

Esanda have an excel spreadsheet, with lots of disclaimer on their website, that will let you put in the details of what you are after and the associated details and will tell you the estimated cost of finanicign pre or post tax dollars.

In my case i was about $6k better off by utilisign a NL than if i had funded it from post tax dollars throguh other methods.

In my case nearly all my km's are non work claimable.

Hope this helps, by the way, one of the best things i ever did.

Regards,

Mark

Hi there Chump Boy,

I have a novated lease that works very nicely for me. The lease is purely on the loan and all other expenses handed directly to work , rather than a maintained lease. The benefit of this is I can get my work done by whom ever I like. Have expenses GST free and paid pre-tax is a benefit (more so in the highest tax bracket).

The other point to clarify on the posts above is that the rate of FBT tax is set at 48.5%. The other values that guys are mentioning i.e. 11% for > 25,000 km is the rate used to calc the taxable value i.e. the value you pay the FBT (48.5%) on. The FBT taxable value is set by the km you do (using the statutory method) but can be reduced by vehicle availability i.e. if you are i/state, o/seas on business or holiday then the taxable value is reduced on a pro rata basis. The catch is that the vehicle has to be kept at work (your word).

Regards,
Hugh

Interesting discussion as I will be returning to Oz in january, and co. I will be working for have a NL scheame. I will be doing a large milage for work, and earning well into top tax bracket, so NL would be atractive. Have lost track of Australian tax system and rates so will need to get on the learning curve, and get my accountant involved