Moving Novated Lease to Partner and Other Weird Issues

cheapanddirty on 20/06/2023 - 13:05

So… About to pull the trigger on a novated lease.

The financials seem to work out, because I am in the highest tax bracket, and I am going for an EV (polestar).

I am looked at a 2 or 3 year lease period, balancing saving and monthly expenses.

Now I have a few questions that I asked the lease person, but I am after a more "balanced" answer as well.

  • I thought there used to be a monthly fee you could include to cover redundancy. Basically, the car keeps getting paid while you are looking for work. The lease person told me that disappeared years ago and doesn't exist anymore?

  • As an alternative, could I move the lease in that redundancy scenario to my wife? The lease person said that can be done and it would only cost a "few hundred" in administration, is that correct? Is it really that easy?

  • Is there anything I need to keep an eye on in terms of the residual value used from Redbook? Would it be low or high, so would I end up paying heaps at the end of the term, would I be left with a great deal to buy the car, or would it be fairly accurate?

Financial Novated Lease

Comments

  • FoxJump on 20/06/2023 - 13:15
    +1

    Gday

    Afaik even the insurance for .. i think it was called unvoluntary unemployment - did not cover redundancy. We discovered this when my dad was made redundant. Maybe youre thinking of the one that would cover you fora a few months. Idk about that one.,

    If your wife works for your same employer, or if your wife's employer's novated lease company is the same as yours, then maybe. But don't count on it.

    If you have to make an early termination you pay:
    - residual + gst
    - managed fees, random fees and finance repayment for the number of months remaining.
    This means, you pay interest for all the remaining repayments.

    So, take the smallest novated lease time period that you can afford. This reduces the amount of future interest you have to pay in case you have to terminate early.

    Residual value on redbook means literally nothing for novated lease.
    There's a table the govt produces which are the minimum residual values on a lease.
    that's what applies.
    https://www.ato.gov.au/law/view/document?DocID=AID/AID200210…

    • cheapanddirty on 20/06/2023 - 19:09

      Thanks, appreciate the response.

      When you say “dont count on it”, is that from experience? Hard to find any real life examples around this scenario. The sales guy obviously told me it is super easy, you’re saying it’s very hard.

      • FoxJump on 20/06/2023 - 19:54

        from experience, i moved my nvl to my wifes employer and her. then i changed jobs and wanted to move back to me - but the paperwork moved too slowly. i had hoped to do 3x 1yr novated leases

        moving from you to her when youre redundant i have not tried. but seems difficult. salesman may be referring to termination of your lease, and your wife buying the car from you. you still pay future interest but then the residual is her principal (ex gst)

        seems difficult because why would her employer do a deal with your employers different nvl company?

  • FoxJump on 20/06/2023 - 13:18
    +1

    Also, consider the interest rate that applies on your NVL may depend on the time period of the lease. So theres potentially some optimising to do there.
    Also consider the FBT exemption for EVS [https://www.ato.gov.au/Business/Fringe-benefits-tax/Types-of-fringe-benefits/FBT-on-cars,-other-vehicles,-parking-and-tolls/Electric-cars-exemption/?=Redirected_URL] applies only for those below LCT.

    To trully maximise your NVL, stay beneath LCT.

    if you're above LCT and get no FBT exemption for your polestar, then ….
    consider a 1yr NVL as you, and then a 1yr NVL as your wife - on the same car.

    This way you make more pre-tax repayments on the finance since each of you claims the 1yr residual rate.

    • cheapanddirty on 20/06/2023 - 19:11

      Yes, thanks for that. Definitely staying below the luxury car tax limit. Car is 74k all up.

      I am considering a 2 yr lease, possibly renewing it for another 2 yrs after that. Anything against that strategy? I am in a higher tax bracket so would prefer to renew it in my name as well.

      • cheapanddirty on 20/06/2023 - 19:12

        Ow, I think Polestar is a full EV so FBT exempt

      • FoxJump on 20/06/2023 - 19:59

        if you can, do one year. then a further one year.
        depending on how silly you nvl company is, they may either:
        a) apply the 1yr residual twice (which is wrong but beneficial to you)
        b) apply the 1yr residual once, then the difference down to the 2yr residual for the second year (which is correct i think)

        the maths are all about bringing forward expenses to maximise the pre tax component. but as an ev below lct there is no post tax component. so its allll pretax. so, then, your focus is to repay as much principal as possible. so 1 yr nvl pays more principal that first year.

        if you do another 1year on her nvl company then she pays the 1yr residual on your 1yr residual and more principal paid!

        but if theres bigger saving from tax keeping it as you then go for that.

      • FoxJump on 20/06/2023 - 20:01

        if you have childcare children then doing a 1yr nvl will reduce your income more that one year. thereby resulting in more childcare subsidy being payable to you - i Think.

        it's ok to do 2 and then 2yr lease too. just less forward expenses and more redundancy risk.

        • kawinuyo on 20/06/2023 - 21:27

          Pretty sure it doesn't. The ccs you have to report fringe benefits. So you get the tax benefits but it doesn't change your income for ccs purposes.

          • FoxJump on 20/06/2023 - 22:03

            @kawinuyo: Yes. However, a non-EV nvl avoids fringe benefit tax given the employee contribution mehod (aka: pay post-tax and pre-tax split). This is made more tricky by an EV being FBT exempt.

            But … i do not have actual experience in this corner case, but .. so . .maybe yes .. maybe no

            • kawinuyo on 20/06/2023 - 22:06

              @FoxJump: That's for fringe benefit tax as in the tax. The css still counts the fringe benefit as reportable income. It doesn't care about pre and post tax. It takes into account everything.

              Sorry should try to be more clear. The fringe benefit tax benefits you in terms of how much tax you pay. However ccs subsidies are calculated on what tax bracket you fall into. The fringe benefit as in what you pay pre tax is still included in your assessable income for ccs purposes.

              • FoxJump on 20/06/2023 - 23:54

                @kawinuyo: oh i see
                thankyou for explaining. Damn. they thought of everything!

      • FoxJump on 20/06/2023 - 20:03

        also remember tax brackets are shuffling in fy24 or fy25 .. google it. so the bar may shift after one year

        • cheapanddirty on 20/06/2023 - 20:32

          If that even happens… feels like labor will get too hard of a time and will pull back on that soon. I completely think it should go ahead, but dont thing labor can keep their promise

          • FoxJump on 20/06/2023 - 22:04

            @cheapanddirty: i'd rather the tax rate to remain unchanged and inflation and interest rises to magically go away.

            • cheapanddirty on 20/06/2023 - 22:53

              @FoxJump: With bracket creep any incentive to study and work hard magically goes away over the years

              • FoxJump on 20/06/2023 - 23:53

                @cheapanddirty: just wait till you have kids in childcare! my effective tax rate right now is 60%

                • cheapanddirty on 21/06/2023 - 10:54

                  @FoxJump: Nope, wife stayed home and covered the kids for a few years. Made sense both financially and from a parenting perspective.
                  Completely off topic, but we, as a society, completely messed it all up when we thought it was a great idea to have both parents working. All that extra income increased demand for housing and with that the size of homeloans, a need for 2 big cars, childcare, stress, divorces, etc etc… but hey, we have more women at work now.

                  We could have just gone for the better lifestyle with; lets get more men to stay at home instead. Same single income, more opportunities for women.

                  • FoxJump on 21/06/2023 - 11:50

                    @cheapanddirty: Unfortunately us humans are a greedy bunch. So, if one family has two working parents, then the spiral begins.
                    Perhaps this is the beginning of equalisation. Before man worked, woman took care of kids. Now, … both work. Maybe with the big pie-in-our-face the RBA is concocting we may end up with whomever can works, and the other stays at home with the kids if they cant get a job because a million jobs collapsed.

                    Idk.

                    As a WFH dad who does childcare pickup, drop offs and works late in the evening to catch up on work; i get to spend more time with the kids and despite it killing me - it is an enjoyable break from work - mostly. I do some cooking too - mainly the "backgroundable" cooking items. Not the fiddly ones.

                    • cheapanddirty on 21/06/2023 - 12:20
                      +1

                      @FoxJump: Ha that sounds like my life. Wfh dad/taxi trying to combine it all 😅

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