Salary Sacrifice/Vehicle Lease

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  StewBalls on 23/08/2011 - 20:20

  Talk to your HR dept/salary sacrifice provider & then take the info to your accountant; any fee you pay her/him will be money well spent for proper advice IME!

  Depending on your employer/job/financial position it can be extremely beneficial IF your other circumstances permit! The exact nature of the benefit is somewhat dependent on your particular industry and the packages on offer to you individually! :)

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  Austin 316 on 23/08/2011 - 23:03

  Agree with StewBalls. Some companies pay the FBT and some don't which makes a big difference to the benefit you get from your packaging/lease. Talk with your HR/salary sacrifice provider for sure.

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  dy4me on 23/08/2011 - 23:13

  What you need to find out is if ur employer supports the employee contribution method. every $ using the ECM offsets the fringe benifit tax. So you end up pay no FBT.

  Simple example.
  You take out a novated lease.
  You owe $2000 in FBT.
  You contribute $2000 towards ur car expenses from after tax $$.(normally u pay all ur car expenses from ur pretax)
  You then owe no FBT.

  The only loss is you dont save the income tax and gst on the $2000. Which is 31.5% income tax and 10% GST ~~38% of $2000 = $760

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  quop on 24/08/2011 - 16:58

  really gotta do your own calcs based on what you would otherwise be paying (varies from person to person, and depends on how much of a bargain hunter you were to start with in your car expenses), vs what you'd pay under salary sacrifice/lease. when i ran my own figures about 2.5 years ago for my first lease, i calculated that in my situation i wouldn't really save any money by leasing the vehicle (overall cost would be about the same). BUT i went ahead with the lease anyway because
  * i could defer the lump sum payment for the vehicle (instead of forking out ~$20k+ from day 0, i keep the money in the mortgage offset account and fork out ~$10k+ 3 years down the track when the lease ends)
  * if i then sell the vehicle (privately), i am likely to get more for it than my residual payment - any such gains (potentially a few $k) would be tax free
  * and if i'm conservative with my maintenance needs, i may get another small lump sum payment from the leftover of my pre-paid salary sacrificed expenses

  the other thing to be aware of is that the lease companies are unlikely to do you any favours, so it's not a set and forget exercise - you gotta watch their charges, calculations, etc. my first mistake was thinking (trusting??) that their so called bulk purchasing power would get me a cheaper car to start with… wrong! my purchase price was a touch over $20k (ex-GST), for a vehicle that was (and still is) advertised for <$21k driveaway (including GST). there went about $2k to start with…

  of course, YMMV… but i'm quite unimpressed with my lease company (leaseplan). having said that i'm not put off from leasing again, even if it means dealing with the same company (no choice if i'm still at the same employer). i'll just be smarter about it next time :)

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    Franky23 on 24/08/2011 - 17:31

    Yes, I'm very conservative with maintenance etc. I didn't realise they reimburse you if you don't spend the maintenance figures quoted.

    I'm looking at leasing back the vehicle I currently own as it will give me money to put towards my new home loan and to pay for furniture/repairs when I move in next year.

    The company I'm looking at going with is NLC

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  Franky23 on 24/08/2011 - 17:27

  Thanks for the advice, I work for the Department of Education so I'm not sure if they offer the ECM, I'll check with the leasing company.