Which fuel efficient cars qualify for FBT exemption?
Electric Vehicles (EVs) and Plug In Hybrid Electric Vehicles (PHEVs) that;
1) were first registered on 1 July 2022 or later
2) have never been subjected to the payment of luxury car tax
A PHEV must have the ability to charge via an external source (plug in). Hybrid vehicles that only recharge while driving are not eligible.
Do I need to use my car for business purposes?
No. Novated leasing is primarily used by corporate and government employees who have NO business use at all.
You do not need any business use and you do not need a log book etc.
A mate said he was hit with a big FBT bill when he had a novated lease 10 years ago, is this something I should be wary of?
Many years ago, the FBT treatment of a motor vehicle was vastly different. You had to travel a certain number of kilometres each year to fall into your selected "kilometre bracket". If you missed that kilometre bracket it is true that you may have incurred a large FBT bill (or a large FBT refund).
The "kilometre bracket" system was abolished many years ago and replaced with a simplified structure.
These days, you have no minimum or maximum kilometre requirement. We will set up your novated leases using the Employee Contribution Method. 97% of our clients pay $0 FBT under this structure.
If you know someone who thinks the "kilometre bracket" system is still in place, they will be happy to learn this system no longer exists and the whole product is now vastly more simplified.
I was told Novated Leasing won't work for me because I don't earn a high salary, is that correct?
Many years ago, the FBT treatment of a motor vehicle was vastly different. Many people paid a large amount of FBT and you needed to earn a good salary and have a big tax saving to offset this FBT and make it worth doing.
These days, we set up our novated leases using the Employee Contribution Method, so over 97% of our clients pay $0 FBT. That means novated leasing works for pretty much everyone, regardless of salary.
It is always true that on a bigger salary the tax savings will be bigger. But on a lower salary there are still fantastic tax savings.
For example, the average tax saving we see for an employee earning $80,000 per annum, is between $1,500 - $2,000 PER YEAR, depending on the car value and lease term etc.
What are the savings?
What vehicles can I novate?
What is included?
How do I arrange insurance?
We offer an excellent policy, or you can choose your own insurer and incorporate the payment into the novated lease.
How do I pay for fuel?
We issue you with a fuel card that is accepted by over 90% of service stations across Australia. We also offer a fuel discount off the pump price at certain fuel outlets.
How do I pay for servicing and tyres?
You choose where you'd like to service your car and buy tyres. The service provider calls PFM and we authorise the work and pay the bill directly from your vehicle fund to the supplier, so you are not out of pocket at all.
What happens if I am spending more or less money than budgeted?
Your vehicle fund balance will fluctuate from time to time in line with your expenses. If for any reason, at anytime, you are over or under spending, we can quickly and easily modify your payments to get you back on track by lease end.
At the end of the lease, PFM reconcile your actual expenses against budget. Any surplus funds are returned to you via your payroll department. Or if your fund is overdrawn, payroll will make a final pre tax deduction as required to bring your balance back to $0
What is a Residual?
A residual value or balloon payment, refers to a sum of money payable at the end of the lease term. The residual is set up front so the employee knows exactly what the amount is before entering into the lease arrangement. At the end of the term the employee has several choices to address the residual
Why do I need to have a residual?
The ATO require that a novated lease have a residual. They also legislate the minimum residual % allowable and we must work within these guidelines.
What happens if I change employers?
The primary relationship in a novation agreement is between the employer and leasing company.
If you leave your employer, PFM must cancel the novation agreement and reconcile the maintenance fund with payroll.
A novated lease is transportable by nature, so you should approach your new employer to discuss transferring your novated lease to them and have it managed by their chosen fleet management company.
In the unlikely event that your new employer does not allow novated leasing (very rare) you can simply set up a Direct Debit to pay the finance repayment (without running costs) directly to the financier via your nominated bank account, without making any changes to the lease.
You also have the option of requesting a payout figure at any time, for any reason and paying the lease out entirely.
Who regulates Novated Leasing?
A novation agreement is an ATO approved arrangement. The ATO has guidelines and legislation around novated leasing and we have extensive knowledge and expertise around this legislation.