Novated Lease.

[Ford Grunt]

If you don't want to modify the car,

that's easy fixed! buy one that's already modified like I did and novate lease it.

That way any replacement of parts are treated as "repairs" instead of "capital" (which your employer doesn't want), because the replacement of parts is getting back to its previous state

"Capital expenses" are expenses which improve something better than it originally was.

If you wondered why an employer generally doesn't want to incur "capital" expenses, this is because "capital" items need to be depreciated on the books of the employer over a number of years (for a car this is 8 years) instead of getting a straight 100% write off as in the case of repairs.

The employer is happy to pay for your repairs as they are a 100% write off in the same year, just like your salary is

[RAPHOON]

I have always chosen CHP over Novated Lease.  The reasons for me have been:

- I get a healthy discount on the car through work, so it negates the GST factor.

- I use a log book to claim the (high) business usage.

- An ITWV ensures that an appropriate %age of the vehicle allowance is remitted without being taxed.  This also allows you to tailor your payments/residual nexus.

- I have no restrictions on KM usage.

- FBT is not an issue.

- Another factor to keep your eye on when considering a novated lease - CHECK THE INSURANCE.  Some people I know have taken the Novated Lease option and have had to make a claim on the insurance policy only to find that their excess is sky high.  The leasing organisation has obviously done this to reduce the costs etc. 

Good luck with whichever way you decide to go.

Just wondering whether you work pays any of the running costs of your vehicle or whether you simply claim a tax deduction for the expenses? from what you said it sounds like you claim a tax deduction (due to ITWV and no FBT).

Cheers,

Ford Grunt.

100% correct.

[Ford Grunt]

My current lease runs out soon and I will be doing it again.  Can you clue me in on these lesser known exemptions?

Panda

There are a limited number of vehicles which are classified as "exempt" from FBT these are taxis, panel vans and utes.

To get the exemption from FBT there are 2 parts. Firstly the vehicle must be exempt from FBT and two the vehicle must only be used for work-related travel.

Part 1, in my case I have bought a single cab ute, this is exempt from FBT. Some people think that they have to be a 1 tonner, this is actually incorrect. In fact you would prefer the ute to be less than 1 tonne because if you fail point 2 (explained below) then the ute is treated a "car fringe benefit" (which is concessionally taxed) and not as a "residual benefit" which is FULLY taxed with no concession.

For duel cab vehicles, some will be eligible for the exemption while others wont, it depends on the payload vs passenger carry capacity. A Miscellaneous Tax Ruling MT 2024 and MT 2024A (A stands for Addendum) explains what duel cabs are eligible for exemption and which ones are not.

Part 2, is that the vehicle must be use for "work-related travel".

Work-related travel is defined as:

travel between: a) (I) place of residence and ii) place of employment or b) travel that is incidental to travel in course of performing duties of employment (ie business trips)

AND

Private use of the vehicle must be limited to: "minor, infrequent or irregular" travel. This is not clearly defined by the ATO, but it is clear that the ATO would be harsh in its application. For example the ATO have deemed that if a say the kids are take to the football every weekend, then this would classify as frequent (while may be minor) and therefore the FBT exemption would be lost.

The different classification for "work-related travel" allows someone who would otherwise have no "work-related travel" in a car essentially have the opposite in a ute!

Let me explain:

It is a long standing view by the ATO that travel from home to work is private travel (unless special circumstances apply eg. itinerate workers) when using a car to travel to work.

However, when a exempt vehicle is provided as a fringe benefit to an employee this travel is re-categorised as "work-related travel".

This means a employee can get a ute and as along as the above two 2 points are satisfied the above provision of a ute will be classified as exempt.

Some people will say: "but you don’t use the tray for anything, you don’t carry anything". The point is there is no requirement to carry anything as you can see from what I said above. My ute does and will only ever carry air!

This means that people can salary package a ute and can purchase it GST-free, package all the running costs also GST-free and can save income tax via the salary sacrifice. And at the end after all the FBT, GST and income tax saving you can pay out the residual of the lease and then own it and do what you want with it!

My suggestion to anyone who is thinking about doing this is to firstly consider whether you will be able to limit you private use to "minor, infrequent and irregular", in my opinion this cannot be done if the ute is your ONLY vehicle ie you don’t have a second car or you don’t have a spouse who you can share a car.

Take this to your accountant and see what they say it took me a while to convince some fellow accountants that it can be done for non-trademans style employees. Ive read, been to FBT seminars and discussed with the ATO on a number of occasions. Usually if it sounds too good to be true it usually is, when it comes to Australian income tax.

If your accountant doesn't believe me, then tell them to get hold of the "NTAA FBT 2004" seminar notes and turn to page 137-139! The example describes about a "tax manager" doing exactly what I have explained above.

Hope this answers you Panda!

[Panda]

Thanks for the clarification. Unfortunately, I don't fit into those criteria, so won't be able to use that particular loophole.

I'll continue looking though

Panda

[Ford Grunt]

Thanks for the clarification.  Unfortunately, I don't fit into those criteria, so won't be able to use that particular loophole.

I'll continue looking though

Panda

<{POST_SNAPBACK}>

Maybe you need an "associate lease" then. They are probably lesser known about then about exempt vehicles explained above.

[Dagabond]

Just wondering who everyone’s with?

And your experiences with different lease companies?

My current lease finish’s at the end of the year and I’m on the hunt for a fully maintained lease.

ie: fuel card, insurance, etc before tax.

I’m currently with CBA but not there fleet lease arm. As my vehicle is the only one with my current employer under a lease and CBA fleet lease will only allow a minimum of 5 vehicles to be leased through them before they will do maintained. (Unless it’s changed in the last 2 years since I’ve been with them).

[Guest memphis]

I work for fleetcare, so im bias, but drop me a PM and ill see if I can get you some info

[Cro]

I'm with Prosperion who go through Esanda Fleet Partners.

Like you I have a fully maintained lease.

The only problems I've had with them is getting the paper work through on time when I got the car. Because I had to call Prosperion, they had to call Esanda, then they had to call me back. Became a nightmare. Other than that, estimates were spot on, and smooth sailing.

[Terebro]

Sorry to be off topic, but quickly are you allowed to modify your vehicles at all with a lease?

[Dagabond]

Thanks Guy's. Keep em commin, websites would be handy too just to do a bit of homework.

Terebro Posted Today, 12:50 AM

  Sorry to be off topic, but quickly are you allowed to modify your vehicles at all with a lease?

By Law NO.

Having said that it does come down to the leasor and what they deem acceptable.

Some do some dont, the same as insurance companies.