Thread: Car allowance. novated lease vs tax claim

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

Originally Posted by 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

Originally Posted by LandyAndy

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.

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.

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

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.

Originally Posted by 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.

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.

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)