Novated Lease for an Electric Vehicle with FBT Exemption

Rajgowda on 01/06/2023 - 23:38

I am planning to choose a novated lease for an electric vehicle (MG ZS EV) and have heard about the FBT exemption. Lately, I've been trying to understand how this works, but I'm unable to comprehend it. If anyone here can explain this to me in simple terms, I would greatly appreciate it.

My questions are:

How is it determined how much of the amount is allocated to pre-tax and post-tax?
How will FBT save me money if my salary is 125k?
What factors should I be aware of before entering a novated lease?
I recall reading about someone who worked with novated leases. If you're comfortable sharing your contact details, I would like to reach out directly for further information.

Automotive

Comments

FoxJump on 02/06/2023 - 00:03

+1

A1: Normally 20% of the car purchase price (excluding some govt charges) is post tax per year. With EV, 0% is post tax.
FoxJump on 02/06/2023 - 00:05

+4

A2: With EV, all expenses are made from pre-tax income.
A3: Interest rate applicable, hidden fees, pay out figures, losing-job-risk-and-paying-out-finance-resulting-in-paying-for-future-not-yet-incured-interest
A4: not me. I just over-optimsed 2 NVL i once had several years ago.

Only do 1 year novated leases. It limits your liabilities in case you lose your job and maximizes savings.
ok . fine 2 years if need be.
but i would be scared about a 5yr novated lease in the current job market,
- Rajgowda on 02/06/2023 - 09:55
  
  Thank you very much for your response.
- childchance on 18/08/2023 - 10:06
  
  Hi FoxJump
  
  I remember you did the calc before and came up with 1 year novated lease being the best value, I guess with No FBT it's still the case (if you have the funds to purchase in full)? Otherwise you'll just be paying on interest.
  
  Cheers
  - FoxJump on 18/08/2023 - 15:47
    
    i think its still the case as you pay more principal pretax too.
    
    bonus if you bounced the nvl to a spouse for a second 1yr nvl.
thatonethere on 02/06/2023 - 05:50

+2

The other thing to consider is the value of the EV after the novated lease. Potentially many EV wont have much value second hand as people are worried about maintenance, battery replacement etc
- Rajgowda on 02/06/2023 - 09:56
  
  Point taken, thank you.
- seannami on 02/06/2023 - 16:55
  
  ZSEV at around 3 years old at the moment haven't dropped much compared to new. Also assuming OP wants to churn after the lease and not keep the car for full lifetime.
Shadowsfury on 02/06/2023 - 07:58

From memory you can novate second hand cars that aren't too old - would the EV special treatment also apply in this case or is that only for brand new ones?

(maybe a relatively new second hand EV is even better value)
- FoxJump on 02/06/2023 - 11:15
  
  not an expert here, but i would expect the treatment to apply for second hand cars as well.
- seannami on 02/06/2023 - 16:55
  
  You can go second hand NVL for EV, bit more of a process IIRC
- DmytroP on 05/06/2023 - 16:52
  
  I think the tax exception applies only to the brand new EV.
  - BargainBenno on 12/06/2023 - 08:14
    
    Correct.
    As per ATO web site
    
    “ the first time the car is both held and used is on or after 1 July 2022”
    
    So the car must not have been registered before by anyone. So demo models are excluded as well?
    - Jaff on 27/06/2023 - 19:11
      
      Hey mate did you find out more if demos are exempted from FBT ?
      - seannami on 27/06/2023 - 19:15
        
        @Jaff: Sounds like the FBT exemption is only for brand new, not ex demo
        
        Jaff on 27/06/2023 - 19:28
        
        @seannami: according to this Demo is eligible if the usage is after 1 July 2022?
        
        'Held and used' the electric car
        The practical effect of this requirement is that the electric car must be used for the first time on or after 1 July 2022 – even if it is held before this date.
        
        An electric car is 'held' when it is:
        owned (includes cars acquired under hire-purchase arrangements)
        leased (or let on hire), or
        otherwise made available by another entity.
        
        seannami on 27/06/2023 - 21:04
        
        @Jaff: Might be something to ask a NVL provider or tax agent, does seem like you are right (I read the "first time held" as it needing to be held for the first time, but I now see I misread)
        
        BargainBenno on 27/06/2023 - 22:26
        
        @seannami: Yes so long as the car was initially held after July 1 2022 it’s ok. So demo cars would be ok so long as first held after that date. Makes it open to a greater range of cars.
JafferMoney on 02/06/2023 - 10:23

Could I do this if I have my own company and effectively employ myself?
- FoxJump on 02/06/2023 - 11:16
  
  +1
  
  you'd have to sign up your company to offer NVL via a NV company, and then yourself.
  but why would you?
  can't the company buy a business car - which of course you'd only use for business purposes.
  
  And even then your company could offer you the fringe benefit of using the business car for personal use, and since no FBT is payable, then … same same
brawndo on 02/06/2023 - 12:18

+1

There's a great calculator on the Toyota Fleet Management website.. plug in some numbers, and you can compare the out of pocket monthly costs between ICE cars and Electric cars.

https://www.toyotafleetmanagement.com.au/novated-lease/novat…

For the MG ZS EV (~$50k), for example, you can expect to be out of pocket around $900 a month, while a non-electric car at the same price point will set you back about $1400-$1500 a month.
seannami on 02/06/2023 - 16:52

I have the same vehicle on NVL and close to the same wage- I went through a lot of my maths here https://www.ozbargain.com.au/node/760061

Also on an FBT exempt car, everything is pre tax. Savings vs financing was about $250 a fortnight for me over 5 years.

My car is due any day now. I'm with SGFleet. I'll be resurrecting or restarting the AMA when it gets here (it's through quarantine and waiting for a truck to get it to the dealer ATM)
- Rajgowda on 02/06/2023 - 18:26
  
  Would you mind sharing your fortnightly payments and tax savings? The NVL agent informed me that I would be paying $490 every fortnight, including service costs, registration, and other fees based on the current quote for a 2-year lease. They also mentioned that I would save around $600 in taxes per fortnight. Is there anything else I should consider before proceeding with NVL? I'm choosing SGFleet as well.
  
  MG is currently offering a $3,000 rebate if purchased within this financial year. I inquired if this discount is applicable to NVL, but the agent said it wouldn't be since they provide a discount by waiving the GST. Did you have a similar experience?
  - seannami on 02/06/2023 - 18:53
    
    +1
    
    The $3000 rebate is given after the NVL goes through, so SGFleet's agent won't put it in- my MG dealer said what happens is on the day of pickup you give your bank details to them by email (it has to be via email so it's tied to your name and therefore identifiable) and in a couple of weeks the rebate arrives. Pretty sure it's just the Vic govt rebate but on Novated lease it is handed over to you directly rather than being taken out of the car's price. My agent did talk about the rebate talked about putting it toward a wall charger etc, but it's not rolled in.
    
    I was quoted $542 pre-tax deduction fortnightly on a 5 year lease, including fees, service, rego (doesn't roll in the Victoria tax though), 6 tyres, insurance, Leaseguard (I'm in a redundancy-prone industry), but without any car add-ons, fuel, premium protection etc. I also opted for the $1200 small repair subscription. Estimated income take reduction was $199/ fortnight. The two year might be different, though $600 seems like a lot per fortnight- are you sure it wasn't per month? My employer also has a $12.50/ fortnight admin fee thing cause why not (union needs to bargain for that to cover EV charging costs/parking at work ;) actually…. I'm now wondering if we are in the same industry…)
    
    Edit: Had originally put in my effect on take home pay fortnightly not payment fortnightly originally
    
    This will have changed a bit since this quote was January and I've had an EBA raise or two since then, and the quote was on my rounded off wage rather than actual (only off by a few hundred/annum though).
    - seannami on 02/06/2023 - 19:00
      
      Just checked the pre-final schedule and the monthly payments (58 payments) is $880, so might be less than quoted- I confirmed several times that it will be fortnightly so fingers crossed I don't have alternating lean fortnights!
    - Rajgowda on 02/06/2023 - 22:55
      
      I think I might be confused about the $600 per fortnight; perhaps it was meant to be per month. I'm still waiting for the quote, as he said he would check the stock and send the quote on Monday. I'm guessing you went with the EXCITE model, while I plan to choose the ESSENCE model.
      - seannami on 02/06/2023 - 23:05
        
        @Rajgowda: Yep, I went Excite- actively did not want a sun roof or pleather seats, and wasn't going to use the roof rails for anything really.
        Only thing I think I'll miss is the heated seats.
    - Gotchas on 03/06/2023 - 05:31
      
      Don’t think you’re entitled to the 3k rebate on novated lease
      - seannami on 03/06/2023 - 06:27
        
        @Gotchas: I'm getting some kind of rebate (apparently), might just be a dealer one or it's the state one, will have more info when I've picked up
        
        Rajgowda on 03/06/2023 - 22:36
        
        @seannami: @seannami Could you kindly keep me informed regarding the rebate situation?
        
        seannami on 03/06/2023 - 22:39
        
        @Rajgowda: Will do, either here or in an AMA, depends how long it takes for the car to arrive and therefore how well I remember!
        
        Rajgowda on 03/06/2023 - 22:46
        
        @seannami: @seannami I'm relatively inexperienced with Ozbargain and not certain about the meaning of AMA. Apologies if this seems like a foolish question.
        
        seannami on 03/06/2023 - 22:49
        
        +1
        
        @Rajgowda: No problem- it's an 'Ask me anything', so basically people indicate they have a certain kind of experience and invite questions. I had started the one I linked earlier to cover Novate leasing and the car, but the car was delayed in quarantine so I'd likely have to make a new one when it arrives to look at the delivery process in NVL and the actual car in my use case.
        
        Rajgowda on 06/06/2023 - 21:14
        
        @seannami: @seannami Today, I received my quote containing the following items. Can you offer your insights into which are essential and which aren't? Your assistance would be greatly appreciated.
        
        2023 MG ZS EV ESSENCE – Brighton Blue
        Fortnightly package cost - $465.66
        Estimated tax savings over the 2 years - $17,207.60
        
        Please note pricing also includes:
        1. 4K Front & Rear Dashcams
        2. Premium Protection Pack - Exterior Ceramic Protection, Interior Leather Protection, Darkest Legal Window Tint, Window & Tyre Protection along with a driver safety kit.
        3. Minor Damage Repair Service – Essential for new vehicles covering you for all minor damage on the vehicle (chips, dints, scuffs on body/rims and holes in the interior).
        
        Fortnightly breakdown (ex GST)
        Lease rental provision $502.95
        Package management fee $17.54
        Servicing and maintenance $7.69
        Tyres (4 replacement tyres) $15.71
        Registration/CTP (2 renewals) $51.57
        SG Fleet Comprehensive Insurance - Vero* $95.32
        OPTIONAL LEASE INCLUSIONS
        Carbon offset $6.00
        SG Fleet Roadside Assistance - Premium $4.15
        LeaseGuard $23.22
        Vehicle package sub-total $724.16
        GST on lease package $72.42
        Less input tax credits available ($72.42)
        GST on employee contribution $0.00
        Vehicle package total (pre-tax + post-tax) $724.16
        Less estimated income tax reduction ($258.50)
        
        Estimated fortnightly package savings
        
        Without salary packaging With salary packaging
        
        Fortnightly taxable salary $4,807.69 $4,807.69
        Pre-tax deduction ($0.00) ($724.16)
        PAYG tax payable ($1,300.65) ($1,042.15)
        Net income $3,507.04 $3,041.38
        Post-tax deduction ($0.00) ($0.00)
        Vehicle expenses (inc GST) ($796.57) ($0.00)
        Take home pay $2,710.47 $3,041.38
        The estimated package saving $330.92
        Income tax (PAYG) savings : $258.50
        GST savings on lease package : $72.42
        
        seannami on 06/06/2023 - 21:41
        
        @Rajgowda: I didn't get their dashcam or the protection pack- I got my dashcams from JB hifi and Supercheap (the car has a USB in the rearview, so not bothering with the hardwire) and I generally think ceramic coat etc are a waste of time- current car has them and it has not helped. I did get minor damage repair for those instances though. I didn't bother with tint (Melbourne and no sun roof, so eh), I'm on the excite so cloth seats and bought seat covers and the driver safety stuff you could get at Kmart if you don't have it already. Admittedly those don't add a lot on there.
        
        Otherwise you look like you got the same inclusions as I did over a shorter period of time.
        
        Leaseguard may not be worth it over two years- were you going to pay residual, release or flip? How stable is your job? Mine is 5 years and I am in higher ed, so felt better with the backup.
        
        Rajgowda on 07/06/2023 - 00:25
        
        @seannami: @seannami Kudos for the insightful info! I've got mixed emotions about Leaseguard, since they mention a max payout of $15,000 for involuntary unemployment and the ability to terminate the lease after three paid monthly payments if still involuntarily jobless. My current job seems secure, but what if I decide to hop onto a better-paying gig at another firm, you know? 😉 So, I'm still considering it.
        
        As for the Carbon offset at $6.00 and SG Fleet Roadside Assistance - Premium at $4.15 per fortnight, I'm not quite convinced it's worth it.
        
        A massive thank you for taking a moment to share your thoughts! 😃
        
        seannami on 07/06/2023 - 05:59
        
        +1
        
        @Rajgowda: Keep the roadside, for sure. The MG one only covers charge and software faults iirc and it's not built into the insurance.
        
        Leaseguard won't cover you if you change jobs voluntarily and your new job doesn't have novated leasing options, only covers involuntary job loss. Means if there is redundancy on the cards you need to hold off taking a package until it is a forced redundancy.
        
        I always go carbon offset. Throwing money at the environment might help, though would be nice to get a clear picture of how the offsetting is done.
        
        Rajgowda on 07/06/2023 - 10:06
        
        @seannami: @seannami I sincerely appreciate your reply and the helpful advice you've given. A heartfelt thank you!
        I'm just exploring more options for making cuts and trims to lower my fortnightly payments.
        
        seannami on 08/06/2023 - 16:59
        
        @Rajgowda: Just to let you know- friend who has an MG4 on order was contacted by the dealer today to get the rebate paperwork in before the cutoff, so the rebate seems to happen and you may want to get your order in soon!
        
        If mine doesn't show up in the next week I'll call to get my forms put in before I get the car.
        
        Rajgowda on 08/06/2023 - 20:51
        
        @seannami: @seannami It's quite unexpected since, at the moment, NSW and VIC rebates are not applicable to vehicles purchased through a novated leasing agreement. You can find more information at this link: https://www.nsw.gov.au/driving-boating-and-transport/ev-reba…
        Additionally, the MG4 hasn't been launched in Australia yet, has it?
        
        seannami on 08/06/2023 - 22:31
        
        @Rajgowda: It's available for order, and the rebate has been applied for. I haven't seen anything from Vic about the rebate not being eligible for NVL (though the Vic rebate is disappearing).
        
        Though from that I take it you are from NSW?
        
        Rajgowda on 09/06/2023 - 10:12
        
        @seannami: Wow, it seems like you've had a stroke of luck in this case, as I've attempted a few others without success :-(. I'll be sure to inquire about the MG4 at my local MG dealership – thanks for the suggestion! By the way, Yes I'm from NSW.
        
        seannami on 21/06/2023 - 12:53
        
        +1
        
        @Rajgowda: I have had confirmation my car will be available to pick up probably early next week, and had just been registered.
        
        the dealer is applying for the rebate for me now, and the government will pay them the rebate, and then MG will pay me. This is in Vic, but if like you said it's not available in NSW on a NVL then it may not be relevant anymore
        
        Rajgowda on 17/08/2023 - 22:35
        
        @seannami: @seannami I couldn't send you a message directly so I thought I'd post here. I'm in the final stage of getting a novated lease and have already signed and sent the agreement. However, the delivery team (SG fleet) just emailed me asking for a certified driver's license (a statutory declaration from a listed occupation). Did you have to do the same thing when you went through the process?
        
        seannami on 18/08/2023 - 06:29
        
        @Rajgowda: Looking back through my emails, I didn't send any images of licenses directly, and everything was done through Docusign. The only email I got form "Novated Deliveries" was a standard novation agreement, interim schedule etc, and again everything went through Docusign. I must have uploaded forms of ID at some point unless they got it via my employer since it's all salary sacrifice.
        
        My suggestion would be to phone the person who you have been most in contact with (Glen or Jefry were mine) and double check, they tend to be happy to answer questions. I also did give a copy of my license to the dealer in person so they could register the car- it could be for that, and if so I'd actually ask them if you could give it to the dealer directly (it would need to be before delivery). All this happens when the car is in port, so you might still have a bit of time to sort it out :s
        
        ETA: I checked again, 99% sure the only person I sent a license to was the dealer- I ended up having to SMS it to the NVL member of the dealership directly at one point. I'd imagine it's for the dealer since finance would be through your employer, but I'd still ring to clarify. I also was using my own plates, so the registration had to be me>dealer initially so that part I'm a bit unclear on via the NVL.
        
        Jaff on 18/08/2023 - 07:42
        
        @seannami: What was your interest rate with sg?
        
        seannami on 18/08/2023 - 08:36
        
        @Jaff: 10.3% in the end from memory
        
        Rajgowda on 18/08/2023 - 08:42
        
        @seannami: Thanks!
ozzie freddo on 03/06/2023 - 00:26

+1

As well as getting the good advice here, join the Australian Facebook Enthusiasts' group for the vehicle you are interested in and tap into the experience of those who have gone before. Leasing EVs is becoming quite popular.
- Rajgowda on 03/06/2023 - 22:40
  
  @ozzie freddo I noticed that the group consists of only 4 members, and I'm uncertain if that will be beneficial.

Novated Lease for an Electric Vehicle with FBT Exemption

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