Help with Novated Lease

LSalternative on 18/12/2024 - 08:45

Hello Lovely People

Was wondering if i could run this past you people who have done a Novated lease .

Got sick and tired of being bent over with pants yanked down as a normal payg employee with Income tax, Div 293, childcare rebate erosion etc.

Don't have access to trusts as a payg employee to channel my income to "manufacture" my income to $190k, $135k or $45k as needed like some fortunate ppl.

Was looking at novated lease and from my limited understanding with the interest costs , NL company margin , inflated running costs it does not seem to stack up ( at most a 3 figure saving if all goes well). Thats mostly due to needing an EV to maximise benefits ( so it can all be pre tax instead of pre/post) , potential future fall in ev price, and the deal killer which is the residual ( 66% for 1 year lease, 56% for 2 year lease and so on).

Was looking at buying a $35k EV like the MG4 with most minimal residual ( would be the bees knees if no residual was there , but from my understanding it does not seem to be possible).

Plus we already have a car ( ICE) for the family with no finance , so this would be a second car with approx 10k ks/yr.

Cant get rid of the family car as we need two cars , where we live public transport is not the best .

Automotive Novated Lease

Comments

  • meong on 18/12/2024 - 08:58
    +3

    Sorry, but what is the question? Is it about which car to buy? Or whether novated leasing is worth it or not?

    • Salternative on 18/12/2024 - 09:02

      If novated lease is worth it or not , for ex if anyone knows of any nl lease providers can offer a lower residual which could make the nl worthwhile , right now , it does not seem to offer benefits.

      • Gunnar on 18/12/2024 - 09:08
        +8

        right now, it does not seem to offer benefits

        Welcome to novated leasing. Every time I’ve done my sums on NL this is the conclusion I’ve come to for my situation

        • meong on 18/12/2024 - 09:12
          -1

          novated leasing seems to be worth it if you get an EV or PHEV.

          for example, Model Y LR will cost me about $60K after 5 years and that is even before the fuel savings of using an EV.

          • Salternative on 18/12/2024 - 09:25
            +1

            @meong: From my limited understanding fuel costs are immaterial during the lease ? its all packaged into the lease anyway .
            PHEV does not allow you to do all pre tax as well, you need to go full EV.

            • meong on 18/12/2024 - 09:30

              @Salternative: yes, which is why i didn't calculate that as savings as normally with ICE car you take that into account.

              my NL provider asked me for EV charging budgeted into the lease (10,000 KM per year) and at the end of the lease they will give me back money to pay for the electricity based on the standard ATO EV charge rate of 4.2 cents per the used KM

              NL provider gave me the option of claiming re-imbursements from commercial EV chargers but I cannot have both so I chose the home charging reimbursements instead.

              • Salternative on 18/12/2024 - 09:38

                @meong: based on 30c/kw, that works out to $450/year , with 10k kms and basing 400k's per full charge ( normal consumption would be .15kw /km) on an ev .
                If you have solar, you could charge for free at home and sell the reimbursements from commercial chargers for a small profit .

                • meong on 18/12/2024 - 10:13

                  @Salternative: yes, i do have solar hence why i went with reimbursement of home charging.

                  i assume for those living in apartments they would need to go with the 2nd option

      • HunterBargainHunter on 18/12/2024 - 09:10
        -3

        Residual % is fixed
        Depending on how long the lease is.
        What you could do is lease for one year at a time, it costs more per lease but you drive down residual much faster over say 3 years.

        • Salternative on 18/12/2024 - 09:24

          Yeah,thats a bit better , gotta speak with a nl provider about this , so say 34% over year 1 and another 34% for year 2 so a total of 68% written off vs 44 % over 2 years straight

        • changyang1230 on 18/12/2024 - 13:32
          +2

          Incorrect unfortunately.

          Just to be precise: the residual value follows the schedule of 0.6563, 0.5625, 0.4688, 0.375 and 0.2813 for 1, 2, 3, 4 and 5 years respectively. What it means that after 1 year, the residual value is taken as 65.63% of the original car value, after 2 years, 56.25% of the original car value etc.

          Now with one year at a time technique, some dodgy NL would convince you that you could use the 65.63% repeatedly, i.e. say for a 60,000 car, the residual value is 65.63% of 60,000 i.e. 39,378; and then for the second one-year you take 65.63% of 39,378 i.e. 25,844, and third year 65.63% of 25,844 etc.

          But this method of calculation has been declared incorrect by ATO as far back as 1993.

          Unfortunately, the real residual value schedule would still have to follow the original 5-year schedule even if you do it one year at a time. i.e. after 1+1 year the residual is 56.25% of 60,000 i.e. 33,750, after 1+1+1 year the residual is 46.88% of 60,000 28,128 etc.

          https://www.ato.gov.au/law/view/document?docid=TXD/TD93142/N…

          Look under example 3 which describes this very mechanism. ATO banned the dodgy calculation as far back as 1993.

    • HeWhoKnows on 19/12/2024 - 08:16
      -4

      OP needs to talk to thier accountant

      OB is not a source of "personal" financial advice

  • geekcohen on 18/12/2024 - 09:33

    In my view, a NL is good if you drive the KMs and get a decent car. I don't see a NL being that beneficial for a $35k car and doing like 10k kms. Better to buy it out right for that.

    I started an NL for my Ford Ranger driving 20,000 kms, and it worked out pretty well. After-tax, it only really cost me $200 a month. I left the company now, so I'm paying everything out of my own pocket now but claiming it through my SMB.

    Just my two cents.

    • Salternative on 18/12/2024 - 09:40

      Yeah, if its your primary car with lots of kays i guess it can work out . what a SMB?

      • geekcohen on 18/12/2024 - 09:42
        +1

        Yeah, if its your primary car with lots of kays i guess it can work out

        Exactly, if it isn't your primary car or doing the kms, then it probably wouldn't work out.

        what a SMB?

        SMB - Small Medium Business

  • Crow K on 18/12/2024 - 09:38
    +11

    Got sick and tired of being bent over with pants yanked down as a normal payg employee with Income tax, Div 293, childcare rebate erosion etc.

    Don't have access to trusts as a payg employee to channel my income to "manufacture" my income to $190k, $135k or $45k as needed like some fortunate ppl.

    Sorry to hear you're having a rough time with your taxes and are one of the unfortunates. Having to pay the Division 293 tax because you're on more than $250k taxable income must be an especially tough cross to bear.

    • Salternative on 18/12/2024 - 09:45
      -4

      Lol was expecting the outrage as when i reread the post .
      While i recognize and appreciate that Im fortunate to be in this position , the truth is the Govt is squeezing the PAYG middle to upper middle class taxpayer like a lemon as the path of least resistance.
      A better path would be to increase GST , tax profits more , stop loopholes like trusts, retained profits etc but no govt has the nuts for that, look at Bill Shorten , Julia Gillard and what happened to them.
      But thats not the topic Champ, I hope you have a great day .

      • Duckie2hh on 18/12/2024 - 10:11
        +2

        squeezing the PAYG middle to upper middle class taxpayer

        I would classify "middle class" as earning median income. Last I checked, median income sits somewhere around $72K/year.

        Source. ABS. "Median employee earnings in main job was $1,396 per week, up $96 (7.4%) since August 2023."

        • Salternative on 18/12/2024 - 11:08
          +2

          There is a distinct difference between taxable income and wealth or "being rich".

          Most wealthy people will only declare minimal private income. for the truly rich, the mansions, cars and boats and all are owned by the shelf companies and trusts and their companies pay their living expenses .

          For the rich one class below, they have family trusts that distribute income as it suits.

          Even your run of the mill tradie will pay themselves $38k/year , while earning 5 times that .

          Australia has 1.9 million millionaires and is forecast to grow to 2.3 million in 2028 .
          https://www.afr.com/wealth/personal-finance/australia-will-h…

          This does not tally up with the taxable income percantile , does it ?

          • Crow K on 18/12/2024 - 11:12
            +4

            @Salternative: Let's cut to the chase, we've presented ATO data that suggests you're the top 1%, and at least three times the median wage.

            You've prevaricated about a bunch of "yeah but what about trusts and tradies doing cash work and all that huh".

            Sure, let's assume that's skewing the numbers. If you're not the top 1%, what % do you genuinely think you're in? Do you think you're below the top 5%? Somehow not in the top 10%?

            Put a number on it, don't whataboutus on how everyone else is a rorter

      • Crow K on 18/12/2024 - 10:22
        +3

        While i recognize and appreciate that Im fortunate to be in this position

        I mean, no, that's literally what I called out, it was a "poor little $250k me, do you realize what this will do to my childcare rebate" moan.

        A better path would be to increase GST

        Someone on the top marginal tax rate saying it would be better to just tax everyone else, including and especially the lowest tax rates, more

        Is this Gina Rinehart's burner account?

        • SlickMick on 19/12/2024 - 09:20

          A better path would be to increase GST

          I agree with this though. If you're broke, you don't buy much and don't pay much GST. The wealthy consume more, and thus pay more tax.

          My only issue is how many tax accountants and ATO employees would be made redundant if we ditched income tax.

          • Crow K on 19/12/2024 - 09:59

            @SlickMick: The counterpoint is because GST is a tax on spending, it disproportionately taxes the poor

            You can do three things with your money: Spend It, Save It or Invest It (shares and stock market stuff, I mean here).

            Poor people don't have much in the way of savings, and the also aren't big players on the investment front.

            So a tax on spending is basically an across the board tax on the poor (regardless of how much money they have).

            The richest of rich people eventually runs out of things to spend on (a mansion can only fit so many jacuzzis in it) so what do they do with the rest of their money? Save it or Invest it, make it grow and, oh look at that, both these activities don't have GST on them.

            My only issue is how many tax accountants and ATO employees would be made redundant if we ditched income tax.

            Kind of the same as how many lives would be saved if America ditched its excessive guns. Makes sense on paper, but in reality it's not practical to execute based on how ingrained the current system is.

            • SlickMick on 19/12/2024 - 11:33

              @Crow K: I don't think that counters that a consumption tax is the fair way of taxation. The wealthy do consumne more and therefore pay more.
              What you're talking about is robin hood style welfare. The poor shouldn't have to contribute at all, and the wealthy need to work hard enough to contribute what the poor need.

              If the wealthy want to live in poverty and save and invest all thier wealth and pay no more tax than the poor, I don't have a problem with that. I know the inheritors of their estate will be spenders - consumption tax is unavoidable.

              The reality is, the poor spend less and pay less GST, as wealth increases so does consumption and thus contribution.

              • Crow K on 19/12/2024 - 11:38

                @SlickMick: Yes, but the poor have no option but to direct 100% of their income towards consumption.

                The rich can decide how much they consume, and also how much income doesn't go towards consumption (which then also increases).

                A law that applies to all people equally doesn't preclude it from being unfair in its application or targeting a specific group. The rule against sleeping on park benches applies to the rich and poor alike, but who do you think it most affects, mansion owners or the homeless?

                • SlickMick on 19/12/2024 - 11:54

                  @Crow K: I really don't see your point. Yes it sucks to be poor and they have no choice but to spend all they have. What's wrong with a loophole that someone could potentially be wealthy but choose to live as the poor? Accumulate all you like, but at some point someone is going to spend, and the contribution to welfare is complete.

                  How is it unfair that the poor can't sleep on park benches?

                  I can see that you're very pro-welfare. We rely a lot on charity for welfare, which is great. All the wealthy who think your way can contribute all they like.

                  What I don't like is someone else saying "I consider you wealthy. You need to contribute more."

                  • Crow K on 19/12/2024 - 12:19

                    @SlickMick:

                    How is it unfair that the poor can't sleep on park benches?

                    The rule against sleeping on park benches is miscalled a "fair one" because it "applies to everyone". But in its application it's only punishing the people who don't have the option of having a home, for instance. It's a law that targets and punishes the poor. And that's why it's actually an unfair law.

                    Imagine a politician saying "we want to encourage investment in Australia's future, anyone who has a share portfolio with $1 million of ASX listed shares is exempt from all taxes".

                    It's a rule that applies to "everyone", but only the rich are going to be able to make use of it: it would be unfair for the same reasons.

                    This is why blanket statements like "well just make the same rule that everyone has to obey" doesn't automatically convey fair treatment or the intended result.

                    • SlickMick on 19/12/2024 - 13:15

                      @Crow K: "Can't sleep on park benches" is not targetted: it could apply to homeless, tourists, activists, teenagers wanting a night out, … Just because not everyone is affected doesn't make it unfair.

                      I guess you would consider that speeding laws unfairly targets motorists, or motorists who speed, or motorists without cruise control??

                      Your other example would obviously be targetted, though has such a law ever been passed? It isn't remotely the same.

                      On the other hand, some laws are targetted, and justifiedly so. If we need more of a profession, they might discount uni fees in that area, or allow more immigration. Opportunities are created for property developers and child care centres that I don't have access to, but I don't have an issue with it. I don't agree with some policies, but I do agree that given the policy, the opportunity provided to others and excluding me is fine.

                      I think we aren't going to agree on this topic.

                      • Crow K on 19/12/2024 - 13:39

                        @SlickMick:

                        "Can't sleep on park benches" is not targetted: it could apply to homeless, tourists, activists, teenagers wanting a night out, … Just because not everyone is affected doesn't make it unfair.

                        If you don't understand the park bench analogy there's nothing more I can offer to this discussion.

                        (This year is the 100th anniversary of the death of the Nobel Prize winning author who first penned the idea, by the way, so it's not just me that has the different take)

                        I can see that we aren't going to convince each other of things, so let's leave it there. Thanks for a civil discussion and sharing ideas.

                  • Crow K on 19/12/2024 - 12:30

                    @SlickMick:

                    What's wrong with a loophole that someone could potentially be wealthy but choose to live as the poor?

                    If it's a society that's scrapped or reduced income tax in favour of a GST style measure, it's created a tax avoidance situation that some can use and others can't - that's what wrong with it.

                    • SlickMick on 19/12/2024 - 13:17

                      @Crow K: How can you expect people of different standings to have the same opportunities? There are many things that the wealthy can do that the poor cannot. This is life.

                      • Crow K on 19/12/2024 - 13:21

                        @SlickMick: And that's exactly why we have things like tax bands that apply different rates of tax based on how much income people make.

                        And also why it's wildly inappropriate to have a flat 10% consumption tax as a proposed replacement for that system (as I expanded above).

                        • SlickMick on 19/12/2024 - 13:23

                          @Crow K: Yeah like I said, I disagree. The poor pay 10% of stuff all, the wealthy pay 10% of millions.

                          The poor are still benefiting from the contribution of the wealthy. But it just isn't enough for you, is it?

                          • Crow K on 19/12/2024 - 13:34

                            @SlickMick: Your proposed model taxes the wrong things and misses the important stuff - it's not enough for anyone.

                            It's a bad idea.

                            Whether or not you understand that or whether or not I'm pro-welfare to the amount you imagine doesn't change it from being a bad idea.

                  • Crow K on 19/12/2024 - 13:56

                    @SlickMick:

                    Accumulate all you like, but at some point someone is going to spend, and the contribution to welfare is complete.

                    Alright, one final pass at this.

                    Assume Australia has a GST only system, no income tax otherwise.

                    If a wealthy person keeps flipping shares on the stock market and compounding their interest in other investments and makes $1 million in income, they pay zero tax on it.

                    If the wealthy person has a milestone birthday party and decides to throw a huge $550,000 month long party with all his mates, how much tax would he be paying if he threw the party in London?

                    How much Australian tax would he pay if he liked the lifestyle so much he kept trading shares in Australia to keep churning his millions, only now he spends most of the year on a cruise ship, partying his brains out?

                    Basically nothing. And that's why you need to tax the income where and when it's made.

                    • SlickMick on 19/12/2024 - 14:18

                      @Crow K: That's a good point. If it were realistically an issue, they'd prob need to introduce reciprocal tax agangements (like you say, the tax goes to the originating system). But the reality is, how much do Australian's throwing $550K parties overseas spend in Australia? I don't think they'd even bother chasing this up.

                      You're clearly dead-set against removing income tax, but I'm still dead-set for it.

                      • Crow K on 19/12/2024 - 14:21

                        @SlickMick: If there were mechanisms to tax the things the GST doesn't cover (interest, dividends, share sales, residential property sales), I'd definitely be more open to the discussion. Keep in mind CGT is an income tax matter as well, so you'd be giving up any collections of capital gains tax.

                        Flat taxes are still fundamentally flawed, but at least then you wouldn't have entire sectors of the economy becoming tax exempt overnight.

                        (And I can't even imagine what a nightmare a reciprocal GST system would be like. If we had one with Ireland, everytime someone in Australia sold something to someone (bottle of wine, tank full of petrol etc) they'd need to check if they were an Irish resident for tax purposes?)

                        • SlickMick on 19/12/2024 - 15:28

                          @Crow K: The benefits of consumption tax (when you do it right and scrap income tax at the same time) include not demotivating people from building wealth and not taxing any of those things: income, interest etc etc. Consumption tax does tax everything, because eventually somebody is going to spend that wealth. Savings and investments are simply deferred (and growing) consuption. You should encourage this - the result is more tax.

                          Absolutely I'd be scrapping CGT. It's one of the worst taxes still in existance. Even if I believed in income tax, CGT is double taxation - I've already paid tax on the income I used to purchase that capital.

                          Consumption tax is fair in all regards: the more you consume the more you pay, every cent is taxed (eventually), but only once.

                          I doubt that a reciprical tax would be necessary, I was only addressing your hypothetical "all consumption internationally". Though it could provide work for all the unemployed income tax workers.

                          • Crow K on 19/12/2024 - 15:42

                            @SlickMick:

                            Even if I believed in income tax, CGT is double taxation - I've already paid tax on the income I used to purchase that capital.

                            Swap "GST" for "CGT" and "item" for "capital" in that sentence, though, it's the same thing.

                            Also, you're not going to be raising enough money with a 10% GST. Right now the entire govt tax collection is 12% GST and 39% income tax. If you want to scrap income tax then 51% of the tax take of the economy needs to be GST, so 4 times as much GST as we are currently collecting. Are you ready for a 40% GST rate? Adding another 30% onto our cost of living/consumption?

                            To close out this discussion, have a look at the "flat tax" wikipedia article and see a world map to see how many countries do progressive income tax versus flat taxes. Flat taxes by themselves don't work.

                            • SlickMick on 19/12/2024 - 17:43

                              @Crow K:

                              it's the same thing

                              consumption tax and income tax are not nearly the same thing. The only correct thing to take from that is that there should be both income tax and consumption tax, which I totally agree with. GST was supposed to replace income tax.

                              I never said 10% was the right rate. I think the GST implemenattion was such a dog's breakfast noone is willing to touch it now, and all the focus is back on income tax.

                              Australia is a wealthy nation. If it had been managed properly I reckon we could all be wealthy with no personal taxation.

                              • Crow K on 19/12/2024 - 18:25

                                @SlickMick: The "same thing" argument is any cash in your pocket right now has been included in your income tax return at some stage… So if you are going to think of CGT on an asset you buy as being double taxation, then under that same logic GST on a purchase you make is also double taxation.

                                I agree society works best with both income and consumption taxes working together in a mix. I don't recall there ever being a proposal for GST to entirely replace income tax; it sounds either wishful thinking or made up - for starters as previously stated it needs to be four times bigger to actually collect enough money to replace income tax. The main fights on GST was whether it would be 10% or 12.5%, it was never floated as being 30+% or 40+%.

                                • SlickMick on 19/12/2024 - 20:23

                                  @Crow K: lol we nearly agreed for a minute there, because I left out a very big NOT. whoops.

                                  Well we do agree that consumption + income taxation results in double taxation. Hence why I meant should NOT have both. It astounds me that you agree that it's double taxation yet society works best with both… oh wait, but that's the robin hood mentality.

                                  They probably never gave serious consideration to scrapping income tax, so didn't need a higher GST. Income tax is a huge industry, it'd take a strong government to scrap it. I thought they were considering different rates for different products? I'd be doing that (coz all other taxes should be gone) and that's how we encourage consumption of what is in the country's best interests. (No tax on fresh produce, 100%+ on tobacco etc.)

                                  This can been a crazy diversion. Dunno how we got here from NL.

                                  • Crow K on 20/12/2024 - 03:20

                                    @SlickMick:

                                    It astounds me that you agree that it's double taxation yet society works best with both… oh wait, but that's the robin hood mentality.

                                    I didn't agree, reread the paragraph.

                                    Assuming everything I am saying is tinged by robin-hood-ness isn't helping your understanding of the situation, either. Because you're all over the place?

                                    First you say

                                    GST was supposed to replace income tax.

                                    I say "nope". Then it's

                                    They probably never gave serious consideration to scrapping income tax

                                    Th-thanks for switching sides and agreeing with me when I said "nope"??

                                    How am I meant to take your arguments seriously if you're just imagining things and telling me them like they're facts?

    • Duckie2hh on 18/12/2024 - 10:08

      OP is going to start a thread next week….

      "Best Investment Properties To Negative Gear"

    • LanceVance on 18/12/2024 - 10:09

      People make the mistake of thinking if you're earning that amount it makes you rich. It doesn't.

      • Duckie2hh on 18/12/2024 - 10:16
        +4

        If you are struggling on $250K+ income, then something else is wrong mate.

        • LanceVance on 18/12/2024 - 10:20
          +1

          Everyone sees the number before tax. Assuming he's $250K plus super and with OP already stating he doesn't have complex tax minimisation strategies in place his take home is about $165K. So just under $100K is taken as tax. That is enough to be comfortable for sure, but with a mortgage and especially if you're the sole provider (unknown with OP) that does not make you rich at all.

          • Duckie2hh on 18/12/2024 - 10:51
            +2

            @LanceVance: I must be living on the poverty line then.

          • SlickMick on 19/12/2024 - 09:29

            @LanceVance: So what's the figure? What salary would it take for you to consider yourself in a different wealth class to somebody on say $70,000.

            I agree that tax sucks and buying EVs through expensive NLs and useless health insurance policies to try to minimise it also sucks.

            But people with tax minimisation problems aren't going to get much love from people with low income problems.

            • LanceVance on 19/12/2024 - 10:54

              @SlickMick: Fair enough. But see I said OP would be comfortable, not rich. The class divide that politicians like to capitalise on would have people believe that anyone on over $150-200k is rich, hence why their taxes can't be reduced because its 'tax cuts for the rich'. When those who are actually rich care more about laws surrounding Trusts and CGT.
              Looking at salary as a measure of wealth is incorrect, assets and your ability to generate income from them is a much stronger indicator of if you're 'rich' or not.

              • Crow K on 19/12/2024 - 11:06
                +1

                @LanceVance: Whether they choose to convert their top tier earnings into wealth or just live an enjoyable lifestyle (spending $50,000 a year on shares versus spending $50,000 a year on restaurants), they're a 1%er doing as they please with their cash though, aren't they?

                It's someone eating wagyu steak every meal and telling everyone they aren't "rich" because they don't have a Lambo in the garage.

              • SlickMick on 19/12/2024 - 11:26

                @LanceVance: What does rich even mean? You're considered rich by those closer to poverty, but you see rich as having yachts or whatever.

                IMO a salary over $150-200K is a fine indicator of potential wealth (potential only because wealth can be squandered); obviously it is also possible to have wealth without an official income so it's clearly not the only measure.

                But no one other than the mega-wealthy are going to listen to you say "don't consider me wealthy - look at all the tax I have to pay".

      • Salternative on 18/12/2024 - 10:20
        +3

        yup , inflation plus property prices means $250k is what $100k was 10 years ago, but the tax brackets are still the same . The govt's safety net with FTB's and other subsidies and the lower tax rates shields the $100-$150k family income somewhat i guess.

        • LanceVance on 18/12/2024 - 10:22

          I'd stretch it out to $250K is what $100K was 20 years ago. But overall your point is exactly right.

  • rambutann on 18/12/2024 - 09:42
    +1

    I used car-bon.com.au, found it way cheaper than the generic one my company offered.

    There's minimal benefit in ICE vehicles under novated leases, but EV's are dirt cheap.
    I calculated a $70k new EV on novated lease to cost less than a $30k second hand SUV over a 5 year period based on 15k-km's per annum. Assuming significant depreciation, selling the car, and paying off the residual.

  • dust on 18/12/2024 - 09:46
    +3

    Use the calculator.

    • Salternative on 18/12/2024 - 09:56

      i did see that , while a very nice and detailed spreadsheet , it compares the savings to be had for someone who is purchasing a primary car with novated lease against buying outright or with finance. I am more after using a short term novated lease to maximise tax deductions .

      • dust on 18/12/2024 - 10:02

        I am more after using a short term novated lease to maximise tax deductions .

        Residual rates are fixed so there's no such thing as a custom short term lease. But with your salary and with an EV I'd be surprised if you didn't come out ahead with at least a 1 year NL?

        • Salternative on 18/12/2024 - 10:09

          Yeah, starting to look like the residual rates are fixed , in that case, NLS would not work out as that would involve replacing my existing old car which is an old runabout , so the costs incurred with the time consumed would not be worth it.

          • dust on 18/12/2024 - 10:12
            +1

            @Salternative: Yeah, if you've got an existing old car to use, it's likely to not be worth it.

            But also, it depends on what interest rate your employer's NL company gives you. (In my experience, it varies A LOT!)

      • changyang1230 on 18/12/2024 - 13:38
        +5

        The spreadsheet guy here.

        "Maximising tax deduction" is a fallacy I see many people fall into.

        "Maximising tax deduction" is a means, not the goal. The goal is to "maximise net worth".

        Unless you have some philosophical reason why you WANT to minimise tax at all cost, being obsessed over "maximising tax deduction" could lead you to false decision in jeopardy of your actual financial goal of "maximising net worth".

        For example, if you could live with a 300 dollar printer but someone convinced you that you "should buy a 30,000 dollar workstation printer because you could tax deduct it", then yes, at 45+2% tax bracket you are "deducting more tax" when you get the 30,000-dollar printer, however the true effect is, instead of using an effectively 159-dollar printer that you need, you have now spent 15,900 dollars on a printer that you don't need, i.e. you have jeopardised your net worth in the fallacious pursuit of "maximising tax deduction".

        My spreadsheet was written in the spirit of "net worth" for various methods of financing a car / keeping old car, while trying to avoid such fallacious "I want to save tax" assumption.

        • dust on 18/12/2024 - 14:23
          +2

          "Maximising tax deduction" is a fallacy I see many people fall into.

          And that's exactly the figure that NL companies highlight when they give you a quote.

        • Salternative on 18/12/2024 - 14:53

          Hey Mate, Thanks for making the spreadsheet public, pretty detailed and informative.

          I was more thinking along the line of a sub $35k car to replace the second car in the family which will be primarily a roundabout to go to the shops, station etc . this car will replace a 10 year old car , and i was trying to see if the deductions are enough to drop me over the DIV 293 threshold or at least reduce it ( its capped at $4500 anyway), haven''t does the full research yet , but if it reduces my ATI ( vs negative gearing or vol Super carry forward which does not reduce ATI) that will help as well.

          For this strategy it would only work if the residuals were not capped where they are now, i.e pay of as much as possible in a year or two, with mimimal residual . I am starting to think this would only work with replacing the current family suv which is the primary car , but convincing the wife to sell the car she drives will be an uphill battle lol.

          • changyang1230 on 19/12/2024 - 09:12
            +2

            @Salternative: Hey sorry forgot to reply to you earlier.

            You probably didn’t explore my spreadsheet deep enough but I had a section on how EV NL affects ATI and div293.

            In short, paradoxically EV NL actually makes your div293 liability WORSE.

            You save money on the car itself but you generally pay more for div293, get less childcare subsidy etc. However in most cases you still end up with more money (ie net worth) overall as the car saving (from tax incentive, GST saving etc) outweighs the DIV293 drawbacks.

            Again I implore you to change the thinking of “I want to save tax” and “I want to pay less 293”. The real question you should be asking is “do I have higher net worth when I NL the EV” vs “when I get the EV via cash purchase” vs “if I simply kept the old car”.

  • Duckie2hh on 18/12/2024 - 09:55
    -2

    Div 293

    Must be tough being so rich to hit the Div 293 tax rule.

    humblebrag

    • Salternative on 18/12/2024 - 09:58

      What for mate, you don''t know me, i don''t know you . What do i get from bragging to you or this community. That was more of a context as to why i am looking at NLS.

      • dust on 18/12/2024 - 10:03
        +1

        It's a problem we all wish we had.

        • Duckie2hh on 18/12/2024 - 10:07

          I wish I had that problem lol

      • Duckie2hh on 18/12/2024 - 10:06

        Nothing wrong with asking about NLS. I was just making a comment about it. Same with anyone else making a comment about whether NLS is worth it or not.

        • Salternative on 18/12/2024 - 10:16
          +1

          Its all good mate , 2 minds or a few hundred are better than mine alone i guess. Thats why i thought wouldnt hurt to ask the community

          • Duckie2hh on 18/12/2024 - 10:51

            @Salternative: I always thought that NVL was never a good option unless:
            1) you have cash to burn
            2) you drive a sh!t ton, (i.e., tradie, REA)
            3) you like to change cars often, so you never keep the cars and don't get hit with the balloon payment.

  • Euphemistic on 18/12/2024 - 10:03
    +1

    IMO NL only when you do lots of kms and plan to turn over the car to another NL. Otherwise you.kight save some tax, but will be lining the pockets of the lease company instead of sending your taxes to a hospital or school.

    • dust on 18/12/2024 - 10:10

      Try the calculator. If you're a high income earner, do a lot of kilometres a year and get an EV/PHEV, it's much better than buying outright.

  • bleugh on 18/12/2024 - 10:16

    I think there's not a 'mahooosive' change for using a Novated lease…

    we went with a 2 year novated lease and large residual on a $65k BYD seal…..
    could then re-NL it on the residual for another 2 years

    it's a lot of faff for low double digits overall savings…….
    BUT, that 'lot of faff' is a few horus of work, and no way you could earn the savings in a normal job with that amount of work!

    • Salternative on 18/12/2024 - 10:24

      interested if you have factored in the possible higher depreciation and writeoffs on EVs with new tech coming in all the time. I mean Buying EVS now is like buying a phone, theres a better one out next year .
      Would the residual be affected if the Price falls for the new BYD seal for ex.

      • meong on 18/12/2024 - 10:39
        +1

        the main tech of EVs are just the battery itself which hasn't seen much changes.

        the rest are software related.

        depreciation is also based on the common condition of the battery after x number of years.

        for example, Tesla Model Y LR payout figure at the end of the 5 year lease is $21K

        • Salternative on 18/12/2024 - 11:12

          yea, but even the batteries are improving rapidly, for ex 2 years back a 50kw battery pack would be considered good, with a charging rate of say 50kwph acceptable .
          newer cars seem to have 80+kw packs , and charging capacity of 100kwph ,plus the price cuts that would mean that the depreciation hit will sting more.

      • bleugh on 18/12/2024 - 10:46
        +1

        yep, BUT….the fuel savings offset that really -

        as an example, we own a 2015 Jeep Cherokee, pretty much the same kW engine, same actual range - about 250kW and 450km range
        The Cherokee costs $120++ to fill the tank
        the EV, lets say it's a (rather high) average of $12 per tank (20c per kWh off peak, free on solar)

        30,000km's is in our contract and is 67 tank fulls - $8k for the Jeep, or $800 for the EV, a $7k difference

        if a typical ICE depreciates 30% after two years ($65k to $46,000…..)
        if the EV depreciates massively to 50% after two years and is worth $32,000, (14k lower than the EV) we're out of pocket by $7k come year 2
        which we'll more than make up in year 4 after servicing, etc etc is take into account (servicing is much lower in the EV)

        so, really, ICE and EV, it's broadly similar really over the first few years, and depending on how you charge really makes the difference in how much you can save.

        • meong on 18/12/2024 - 10:54
          +2

          it makes more sense to go EV if you have a higher tax bracket as you will be able to claim it all on pre-tax salary.

          depreciation also affects the payout figure of the vehicle at the end of your lease.

          also, the inclusion of fuel also affects the novated leasing agreement cost and your monthly salary impact.

        • Salternative on 18/12/2024 - 11:09
          +1

          Yeah , makes sense once you factor in fuel in the mix I guess.

      • Euphemistic on 18/12/2024 - 10:49
        +1

        I think depreciation will reduce once people start recognising that batteries really do last a long time and the second hand market matures a bit more. Used EVs are selling well in EU, aus is just behind by a few years.

  • jv on 18/12/2024 - 10:25

    we already have a car ( ICE) for the family

    🧊

  • uncompressed on 18/12/2024 - 11:20
    +2

    1. Residual is fixed by the ATO. You can't change that.

    2. "Inflated" running costs -> You get back what is unused at the end of the lease. You can vary this if you think it's too much. Either way, you're not being ripped off there. Sure, the insurance under the lease provider could be higher (or lower in my case), but you're free to find your own insurance and work that into the budget.

    3. Pretax better than post tax if you're definitely going to buy a new car, especially for EVs where you don't have FBT.

  • Drakesy on 18/12/2024 - 12:08

    For novated lease to work you need the following:

    1. Pay to fall in the second highest tax bracket ($135k+)
    2. You don't have cash (after interest rates etc it'll come out close to par as if you paid with cash).
    3. Buy an EV or PHEV, the tax breaks (FBT, GST exemption etc.) all add up. ICE don't really make sense.

    The car you've chosen is already on the right path. i'd be wary though of forcing the provider to be fully transparent with what fees and interest rates are going to be incurred.
    I was looking for an Atto 3 and interest rates were anywhere between 12% and 8%. Shop around.

    • Salternative on 18/12/2024 - 14:57

      Yeah mate, my strategy was as below(does not seem it will work)
      I was more thinking along the line of a sub $35k car to replace the second car in the family which will be primarily a roundabout to go to the shops, station etc . this car will replace a 10 year old car , and i was trying to see if the deductions are enough to drop me over the DIV 293 threshold or at least reduce it ( its capped at $4500 anyway), haven''t does the full research yet , but if it reduces my ATI ( vs negative gearing or vol Super carry forward which does not reduce ATI) that will help as well.

      For this strategy it would only work if the residuals were not capped where they are now, i.e pay of as much as possible in a year or two, with mimimal residual . I am starting to think this would only work with replacing the current family suv which is the primary car , but convincing the wife to sell the car she drives will be an uphill battle lol.

  • freefall101 on 18/12/2024 - 12:34

    Have you thought about asking an accountant? It's kind of what they do.

    That aside, spending money to save tax is always stupid. Unless you need whatever you're buying, you're only ever going to save a fraction of the dollar you're spending. Just keep driving the cars you have until you need a new one, then it'll make financial sense to look at how you can reduce your tax burden with it.

    • Salternative on 18/12/2024 - 14:55
      +1

      I did, his advice was buy an investment property Lol .

  • drprox on 20/12/2024 - 22:02

    For an EV yes it's worth it for almost anyone.

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