salary packaged cars

[sports fan]

hi all,

does anyone here have a salary packaged car? i want to hit my boss up for one and trying to get informed about these types of arrangements before i ask.

i dont think he will pay for a fully maintained vehicle so i think a non maintained novated lease will be the most appropriate form of finance?..

if anyone can offer their advice or experiences with this i would appreciate any feedback on the matter,

regards, SF

 

[pennyk]

I receive a car allowance, which gives me a lot of flexibility in how I use it/ which sort of car I have etc.

Do you use the car for work related travel (not just the drive to and from work..)?

If not, the company may need to pay fringe benefits tax, which can doubles the cost to the company of the actual expense, and so is a big disincentive for them to use this type of arrangement.

Pen

 

[andymac4321]

Hi,

Make sure you do the Kms to avoid higher FBT rate and watch the maintenance and fuel costs. It is no fun having to fork over extra money if you run over budget.

I had a novated lease for 8 years. The killer is FBT. If you travel daily and can reach 25000kms per year then FBT is reasonable. The reason I dropped out is the company shifted location and no parking was available. So I ended up travelling to work by train. My company then adjusted my FBT component the following year as I was not meeting 25000Kms. I could bearly meet 17000kms which is the next bracket down. Also keep the extras you add into your car order seperate as they just add to the FBT which you pay for yearly for the life of the lease.

I also had some maintenance issues with one of the cars. This is ok in the first year as it covered by warranty. I then found these issues still occurring after warranty and eating into my maintenance budget. Once the budget is gone you are paying it out of your own pocket. I was lucky and managed to get the manufacturer to fix some of the issues under warranty but some I didn't.

I ended up buying out the lease on the last car I had. Yes the one with the warranty problems. I figured by then that not much more could go wrong. The lease company added GST to the residual price.

Hope this helps

regards Andy

 

[sports fan]

pen,

thanks for the reply, yes i do alot of travelling around for my work (im a junior manager for a builder. the sites are all over sydney and i go between all of them regularly)

i get a fuel allowance currently but my old ute is costing me money all the time in maintenance it is about 15 years old, so yeah would like to upgrade it.. as i am on salary not abn im trying to think of the best way,,

 

[sports fan]

andy,

thanks for replying.. i hadnt considered FBT.. i was just looking at the ATOs website trying to get my head around it its pretty hard going what is your recomendation i would cover 25,000kms per year quite comfortably, paying the FBT would have to be better than copping the depreciation of buying a new vehicle outright wouldnt it??

regards SF

 

[65fbk]

andy,

thanks for replying.. i hadnt considered FBT.. i was just looking at the ATOs website trying to get my head around it its pretty hard going what is your recomendation i would cover 25,000kms per year quite comfortably, paying the FBT would have to be better than copping the depreciation of buying a new vehicle outright wouldnt it??

regards SF

Have a look into FBT exempt utes. The ATO publishes a list of acceptable vehicles and the kilometers then become irrelevant.

 

[Fudge]

I have a vehicle in my salary package.

It represents a $12000 per anum pay cut.

This is for me by far a better way to go. (I use over $12000 in fuel a year!!!)

I am in construction company and have a 4x4 Hilux. All petrol, services, extras, wheels, RACQ, insurance and rego gets paid by my employer.

I couldn't ask for a better deal....and I can use it anywhere for private use (except for the beach, as it is not insured for the beach)

If you do alot of K's, I would say go for it.

Cheers

F

 

[wobbycarly]

You may want to consider getting a payrise that "covers the cost" of running your own vehicle. This will in turn, increase your super contributions, improve any finance servicability leave loading (if applicable) and if there is a %age wage increase, your gross increase will be bigger.

Just another option to throw into the mix.

 

[Spectre]

good point, getting a lease can really screw up your servicing ability when going to borrow for property.
So one side you're winning on tax but then you can also wreck your investing strategy if not careful

 

[KidsInheritance]

I receive a car allowance in lieu of a fully maintained company car.
Fortunate I work for a company that is quite generous in this regard.
I drive a (real) 4x4 which even with heavy fleet discounts & lots of extras added ended up around $58K (including GST which you don't pay under a novated lease).
My vehicle is on a 4 year lease, around 25,000km per year and a 37.5% residual - means I have to pay out around $22k to buy the vehicle at lease end (this year) which wll still have a retained value of over $35K (any $ between the sell price & the amount owed to lease co are tax free for you).
I also ended up with $ in my pocket from the allowance after all running costs, reg, insurance & maintenance were covered.
So, in my case it has been great but keep in mind the type of vehicle selected (how it depreciates - with some makes/models you will struggle to get the residual back) & the km you do -ideal to do round 25,000pa to minimise FBT & keep resale value solid.
Good luck!

 

[shannons]

FBT shouldn't be an issue

Hey Sports fan,

You should contact a Novated lease company so that you can get a pay to pay comparison.

When we do senarios for our clients, we show them what they are getting in their payroll today (real into the wallet amount), this is then compared to
a) Paying for the car using your cash in the wallet, and
b) Paying for the car through payroll.

In doing the impacts your annual kms, car price and your salary, all determine if there is a benefit in a novated lease for you.

As the Australian tax brackets have been stretched to the top bracket being over $180,000, most people have the novated lease return a benefit equal to about two extra weeks pay a year.

andymac4321
I would recommend going back to your fleet provider and ask them to do the same scenario with the FBT under the 'Employee Contribution method'.
Also driving more kms to lower the FBT isn't always best. ie 10,000 kms a year more on $50k car might save $900 - $1200 a year, but, in 3 years the 30,000 kms extra might impact the resale value.

65fbk - Take care with the FBT free vehicles, it needs to be 'rare and infrequent private use', ie only taking rubbish to the tip. If the vehicle drives 20kms to and from work a day, its not infrequent private use. Check with your employer what they accept through their Novated lease driver policy


regards

Shannon