Car allowance. novated lease vs tax claim

[Yorkie]

Am sure there must be someone on here that could offer some advice, can pm if preferred.
With the change in fbt rules for someone doing 20-25kkm pa for only work use which system is better?.

Appreciate any thoughts advice.

[LandyAndy]

I was looking at providing my own work ute last year,I dindnt go thru with it.
If you go to the ATO website they go thru several different methods of claiming vehicle expenses with workings.Its quite informative.
My accountant told me a salary sacrificed vehicle(novated lease) cannot be used to claim vehicle running costs,something about double dipping;););););););)
From what I worked out it was far more advantageous to buy the vehicle then claim the appropriate ratio of running costs as a percentage,it also includes interest on the loan.My vehicle would have been aprox 10000K private 35000k work.
Andrew

[LandyAndy]

I was looking at providing my own work ute last year,I dindnt go thru with it.
If you go to the ATO website they go thru several different methods of claiming vehicle expenses with workings.Its quite informative.
My accountant told me a salary sacrificed vehicle(novated lease) cannot be used to claim vehicle running costs,something about double dipping;););););););)
From what I worked out it was far more advantageous to buy the vehicle then claim the appropriate ratio of running costs as a percentage,it also includes interest on the loan.My vehicle would have been aprox 10000K private 35000k work.
Andrew

Also.
Novated Lease mobs rip you off with a very high interest rate and admin fees.My D4 was much cheaper to finance thru LRAs 4.99% deal than what our novated lease people thru work could do,the low km per year I do meant no real big savings on GST expenses for running the vehicle.
Andrew

[sheerluck]

Also.
Novated Lease mobs rip you off with a very high interest rate and admin fees.My D4 was much cheaper to finance thru LRAs 4.99% deal than what our novated lease people thru work could do,the low km per year I do meant no real big savings on GST expenses for running the vehicle.
Andrew

Totally agree with this.

The first novated lease vehicle I had (about 7 years ago) was well worth it, and that was with SGFleet. The second one I had was borderline, and definitely not worth it once I left that employer, and had to pay the lease myself as the new company lease provider wouldn't take on an existing lease.
And the latest one that I have had quoted was definitely way, way over the top with what they were giving me as a lease cost, admin charge and monthly additions for servicing, tyres, and sundries. And their insurance was fabulously expensive too.

[Yorkie]

Thanks guys, from other info received taking a loan sounds like a better option after the recent changes, will think about it further but doubt I can get into a d4, those grader drivers earn their crust. :)

[Chilly]

Hey Yorkie,

Not used Novated lease myself....but it is on the cards in the next few months.

Several blokes at work have done it over the last 12months. One has told me that he could not find a better deal even using the low rate loans currently on offer.

When I enquired I asked about tyres, servicing,insurances etc and was informed that these were negotiable. E.g. I would self service,( I am a mechanic) Already have Road side recovery etc.

All who are using it and I have spoken too recommend it.

Chilly

[WhiteD3]

I have always had a car allowance and find the log book method the best. I do the log book for 12 months or so, pick the busiest 3 months and use that for five years. I have been told that novated leases only work when you are doing >25k pa.

[rar110]

I have always had a car allowance and find the log book method the best. I do the log book for 12 months or so, pick the busiest 3 months and use that for five years. I have been told that novated leases only work when you are doing >25k pa.

The following is from my own unqualified research. If you are buying an expensive vehicle with a substantial part being work travel, the above is the way to go.

On a novated lease, employee contribution post tax is dependent on the vehicle value. For example if you buy a $40,000 vehicle then 20% of its value i.e. $8000 in lease and running costs will from after tax income. Any additional lease/running costs will be from before tax income (so is in effect a tax deduction). So a novated lease arguably works best on low value vehicles to minimise the amount the employee contributes in after tax income. The other big advantage for a novated lease is you get a GST refund on the purchase price (if through a dealer as no GST on private sale) and ongoing costs.

Personally, if I go down the novated lease option I'm looking at a late D3 with a value of about $30,000 so an after tax contribution of $6000 per year toward lease and running costs. The remaining costs are pre tax. The finance costs on novated leases are generally high. So you really need to compare the bottom line cost against say a home loan finance option with all costs being post tax.

[sheerluck]

RAR110, one thing you have to be aware of is that you pay GST on the residual at the end of the lease. So you do gain the value of GST on the difference between the purchase price and the residual, yes.

GST on the monthly running costs is also reclaimed, but you need to weigh up the value of that, versus any admin fee charged by the lease company (and they vary. The first novated lease I had, charged a monthly fee of $19. The last I was quoted for was $55/month)

[rar110]

RAR110, one thing you have to be aware of is that you pay GST on the residual at the end of the lease. So you do gain the value of GST on the difference between the purchase price and the residual, yes.

Thanks I didn't realise that. So aim for a small residual also. And yes you need to compare the total cost of novated lease option incl fees against other finance options. Much of the tax advantage gets taken up by high finance and other costs.

[pibby]

..........

Personally, if I go down the novated lease option I'm looking at a late D3 with a value of about $30,000 so an after tax contribution of $6000 per year toward lease and running costs. The remaining costs are pre tax. The finance costs on novated leases are generally high. So you really need to compare the bottom line cost against say a home loan finance option with all costs being post tax.

can a car older than say 3 years be under a novated lease? looked into this 15 years ago and that's what i recall from then. times have probably changed.

[rar110]

can a car older than say 3 years be under a novated lease? looked into this 15 years ago and that's what i recall from then. times have probably changed.

Probably depends on lease provider. Mine will do up to 2007 model D3.

[Bigbjorn]

Much of my working life I had a company car with full private use. I can't understand why workers want to buy a work vehicle that should be provided by the employer if one is needed to carry out your duties. It feels to me like giving part of your salary back to the boss by relieving him of the responsibility of providing an essential tool.

[Chilly]

Much of my working life I had a company car with full private use. I can't understand why workers want to buy a work vehicle that should be provided by the employer if one is needed to carry out your duties. It feels to me like giving part of your salary back to the boss by relieving him of the responsibility of providing an essential tool.

That is not the case for me. I can novated a car which is not a company car.

[Michael2]

If the car is leased then a proportion of the repayment costs are pre-tax. Don't forget, you're paying interest on the car loan.

If you own the car, then you can depreciate it (I think it's 26.5%p/a) and claim the running costs at percentage of work use (as determined by ATO formula).

If your car is a commercial vehicle [1,000kg + payload] (truck, van, ute or dual cab ute with a cargo capacity that exceeds the passenger capacity) then you claim 100%.

There is a miscellaneous tax ruling that classes the defender 110 SW as a commercial vehicle.

So say you bought a 2nd hand Defender for $30K (on the road)

Your deductions may look like this

Depreciation $7,800
Registration $780
Insurance $800
Fuel $3,000
Service & Repairs $2,000
Accessories (that form part of the car) $2,500
Tyres $1,200

Total claim for Yr 1 - $18,800
If your tax rate is 37% then you're savings are $6,689

If you leased the car (some lease companies won't lease a commercial vehicle) the above would all be deductions, but you would not have the depreciation, and you would be paying interest on the loan.

So if your employer allows you to lease a car, and you can't legitimately claim it, then leasing is a better option. If the car can be claimed as a deduction, then consider proportion of work use to figure out what plan gives you the best return. If it's a commercial vehicle and you can claim all of it, then provided you can afford to buy it up front, owning it is better.

[sheerluck]

Much of my working life I had a company car with full private use. I can't understand why workers want to buy a work vehicle that should be provided by the employer if one is needed to carry out your duties. It feels to me like giving part of your salary back to the boss by relieving him of the responsibility of providing an essential tool.

A number of people, myself included, are given the choice - be given a company car from a narrow list of available makes & models (which may or may not fit with what you would choose, or even want to use privately) or be given a car allowance and lease your own.

In my case, the list comprised a Falcon or Commodore sedan, or I could downgrade a level and get a Cruze.

Always a bit tricky getting a dog in a sedan.

[LandyAndy]

Probably depends on lease provider. Mine will do up to 2007 model D3.

I think you will find the vehicle cant be older than 7 years old at the end of the lease unless its a "collectible".I did get a quote on an XB GT Falcon a couple of years back,the novate lease company were happy to do it,accountant advised against it.
Andrew

[Yorkie]

Thanks all, am thinking a dualcab which comes in as exempt will be the go. I could get a Camry provided but don't want a yota.

[Michael2]

Some lease companies allow for older vehicles. My D2a will be 12 years old at the end of the lease. Plus they let me do my own services and refund parts & oil invoices.

Sent from my Nexus 7 using AULRO mobile app

[Redback]

Thanks all, am thinking a dualcab which comes in as exempt will be the go. I could get a Camry provided but don't want a yota.

Is this a second car Liam, for to and from work and are you getting rid of the D2??

BTW finance is much cheaper in the long run over a Novated lease, Kerry went through the numbers not that long ago.

Baz.

[Yorkie]

2nd car for work, d2 may not be around too much longer.