The changes to the Fringe Benefits Tax (FBT) and its effects on salary packaged cars have been the subject of numerous conversations and left many people confused. Unfortunately, it also made Novated Leasing more confusing to people. Since the election has now passed, the Coalition promised to work toward undoing these changes and going back to the original FBT calculation system. Now is the best time to consider salary packaged cars.
To help you understand how Novated Leasing operates and eliminated any uncertainty about the recent changes to the FBT, here are five facts about Novated Leasing.
1. Most Employees Can Benefit from Novated Leases
There is a popular assumption that employees need to be high-income earners to benefit from Novated Leases. This is not true. According to ASPIA data, drivers with a salary packaged car have a median income of about $70,000. The average cost of a leased car is $34,500. Novated Leases work as long as the fringe benefit tax rate is not more than an individual’s marginal tax rate.
2. Novated Leases Are Not For People Who Use Their Cars Solely for Business Purposes
Because of the recent election’s outcome, the changes to the FBT that were to take effect in July will no longer occur. The statutory method of FBT calculations will remain in use. Using this formula, the Australian Tax office does not recognize a difference between business and private use, eliminating the requirement that mandates the vehicle is used only for business. You will no longer need to record your travel details in a logbook, saving bucketloads of time!
3. You Can Use Novated Leases Even If You Are Not A Long-Distance Driver
In 2011, there FBT was changed to institute a gradual transition to a flat 20 per cent FBT rate. This rate is unaffected by the amount of kilometres (km)driven. The change allows drivers that travel less than 10,000 km a year to take advantage of salary packaging. That is less than 200 km each week.
4. All of Your Vehicle’s Operating Costs Are Included in the Lease Payments
A legitimate Novated Leasing company should inform you of all of the costs of your vehicle in one monthly payment. What should be included in this payment includes the roadside assistance, maintenance, fuel, registration and other vehicle running costs. Having an inclusive payment means no surprise costs.
5. Creating a Repayment Plan is Easy
You can use Novated salary packaging and lease calculators to work out your repayments. Using the system is quick and stress-free. The Salary Packaging Repayment Schedule states how much money will get deducted from your pre-tax salary every month to pay the lease. Our schedule lets you plan your monthly budget ahead of time.
Recent changes to the Fringe Benefits Tax have left many people confused on the effects the changes have on salary packaged cars. Hopefully, these five facts have helped you to gain a better understand of Novated Leases and cleared up any confusion about any recent changes.https://plus.google.com/105983113068459787550
Nigel Malcolm is the CEO of novated leasing company, Novated by Fleetcare. Connect with Nigel on Google+ now!