Cars + Running Expenses – Accountants Geelong l Canny Group
Did you know transport is the second largest expense after housing, equating to almost 14% of household budgets? As this cost continues to climb, people are looking for more effective ways to reduce their daily bills. A Novated Lease on a new or existing vehicle may be the solution, providing significant tax savings on the purchase price and running costs of a vehicle.
BE SURE TO CONSIDER ALL YOUR OPTIONS..
Have you consulted with Canny Group about a smarter way to purchase your next vehicle? Or if there is a more financially sound way to run your existing one?
As transport costs continue to climb, people are looking for more effective ways to reduce their daily bills. On average individuals spend over $17,000 annually on transportation, equating to almost 14% of household budgets^.
A Novated Lease on a new or existing vehicle may be a solution to ease transport bills. It is a three-way agreement between you, the financier and your employer, consisting of a vehicle salary packaging arrangement to pay a large portion of the finance and running costs using your pre-tax income. No business-use is required.
There is no other product or method in Australia that allows tax savings on the personal-use of a vehicle.
And whilst business-use can be taken into account, because of the way the ATO have catered for this concession, unless significant, business-use likely won’t increase the saving any further.
Novated Lease savings come from four key areas:
- PAYG TAX ON VEHICLE REPAYMENTS + RUNNING COSTS – Australian tax law allows you to salary package a significant portion of the total finance repayments and anything the ATO deems to be a necessary vehicle running cost.
- GST ON FINANCE REPAYMENTS + RUNNING COSTS – In addition to saving on PAYG tax, you also have the ability to save the GST on the salary packaged portion of finance repayments and running costs (i.e. an additional 10%).
- REDUCED VEHICLE PURCHASE PRICE – Leasing providers like FleetChoice have purchasing power, resulting in significant discounts on the price of a new vehicle.
- NO GST ON VEHICLE PURCHASE PRICE – If you purchase the vehicle from a GST-registered vendor (e.g. A fleet provider, a new/used car dealership or a GST registered business), you have the opportunity to not pay GST on the purchase price of the vehicle. The vendor is paid the full price for the vehicle however you will only finance the GST exclusive price of the vehicle.
Put simply, a Novated Lease allows you to drive the car you want and pay for it in a cost effective way. It’s also common for families to take advantage of multiple Novated Leases as the lease holder does not need to be the main driver of the vehicle.
Whether you travel 0km or 50,000km per year, the total cost of ownership under a novated lease is more often than not, much cheaper than had you paid cash for the vehicle.
Significant discounts on new cars are accessible via a Fleet Provider because of the sheer volume of vehicles they purchase each year. And whilst a used or demo vehicle could be put into a Novated Lease agreement, it’s a good idea to get a comparative lease quote on the brand new equivalent. In some cases, a year old used vehicle or demo model may come in at the same lease cost, or more!
Alternatively, if you aren’t ready to say goodbye to your existing car, you can have a Novated Leasing Consultant run the numbers on packaging your existing vehicle and running costs into a Novated Lease agreement.
Whilst fleet pricing is just as good all year round, May-June can provide that little bit of extra saving. With EOFY knocking down the door, if you find you are in the market for a car, it might be a good idea to enquire into a Novated Lease soon, so you have enough time to compare your vehicle options wisely.
Most people don’t realise the amount of money they spend on getting from A to B, including to and from work. It’s the second largest expense after housing, so it’s not surprising that 48% of employees are stressed about the cost of transport^.
If this sounds like something you are interested in knowing more about, get in touch here or speak to a Novated Specialist on 1300 34 33 88.
Alternatively if you would like to understand more about the benefits Novated Leasing can bring to your business, at no cost, download a free copy of The Forgotten Employer Initiative whitepaper.
FleetChoice specialise in the SME market and we make it easy for the employer because ultimately they do have to agree to be a part of the employees Novated Leasing agreement.
By Ellen Jessop
After a long 10+ years in the industry, Ellen has a passionate focus and demonstrated history in Income Tax Law, Fringe Benefits and more specifically Novated Leasing. Enjoyer of expensive things like Reformer Pilates and our good old friend interior design, she currently helps pay for her fabulous Art Deco apartment renovation and ongoing exercise classes using the savings she enjoys on leasing her car.
*(FY19; 32.5% for those on $37,001-$90,000 annual Income, 37% for those on $90,001-$180,000 annual income). ^Source: 2018 Employer Talent Investment index. A national study conducted by Mantis Research.