Novated Lease Residuals

In order to avoid liability for Fringe Benefits Tax (FBT) a novated lease must have a Residual Value. We have a look at what this means, covering all the things you need to be aware of including residual value percentages and what your options are.

What is a Residual Value?

What this means, essentially, is that at the end of a lease term there must be a remaining amount to be paid to purchase the car.  This payment, inclusive of GST, must be made in one go and you, not your employer, are responsible for making the payment. This is also known …

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Australian Drivers Save Over 50% On Petrol For Life

After the cost of funds, fuel is likely to be the second biggest cost of car ownership.  You already know how a novated lease saves you heaps on your car lease, (remember?  Lease repayments pre-tax, fleet-owners discount and no GST on the purchase etc etc) but did you know that a fully maintained novated lease will save you even more (proportionally) on your fuel?!

 

Here’s how…

Well first up, you use your fuel card which is regularly topped up via your pre-tax income.  Whammo – that’s an immediate saving of up to 47% depending on your marginal tax rate.  If you’re earning …

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Novated Lease Example

If you’re still trying to get your head around how a novated lease works, here’s an example that might paint the picture for you.

Keep in mind, these circumstances might not reflect yours and therefore the benefits and amounts listed here might not represent the benefits you will receive based on your personal situation.

Take Sally.

Sally is 32 years old and earns $65,000 per annum. She wants a brand new car valued at $20,000. She estimates that she’ll drive around 15,000 km a year to and from work, social visits and weekends away. Sally has little if any work related travel.

Sally is …

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What to Look for in a Novated Lease Calculator

A novated lease calculator is a great way to get an indication of the tax savings and lease cost. It can help you decide what vehicle value to budget for based on your income, travel and lease term.  Of course a calculator isn’t anything concrete – they are designed to give you as accurate an estimate as possible. Try and find a salary packaging calculator that allows you adjust the inputs and enable you to compare to alternative methods of funding.

Important Features

Things that are important include:

Vehicle type – Being able to select the vehicle type will provide a more accurate budget …

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The Disadvantages of a Novated Lease

Of course, like most things in life, there are some things you need to be aware of. To ensure that you are fully informed and thinking carefully about whether novated leasing is right for you, we cover the main disadvantages of novated leasing below, depending on your personal situation and what it is you are looking to achieve with a novated lease, they may or may not apply.

1.It’s your car so its your liability. Unlike a company car, you can’t just hand the car back or leave the car behind should you change employers. Though a novated lease agreement is essentially …

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Novated Leasing, FBT & The Statutory Formula

FBT it is the very reason the opportunity to novate your car exists.

What is FBT?

FBT (Fringe Benefits Tax) is simply a tax is payable on the private use of a non cash benefit provided to employees. Until 1986 employers were able to offer perks to their employees, such as cars and mobile phones, without having to pay tax. Thanks to changes under the Hawke government, tax is now payable on the private use of these benefits and is based on the taxable value of the benefit.

If there is no business use how can I have a tax break on my car?

With FBT …

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Novated Leasing and Petrol

One of the most attractive benefits of a novated lease is the inclusion of petrol in your repayment sums.  As long as you have a fully maintained novated lease, you’ll be entitled to a free petrol card.

What’s so great about this?

First and foremost, it means you’ll always be paying the same amount each month despite the rise of petrol prices.  No more avoiding filling up on days where petrol prices are at their highest or going out especially on days when petrol is the cheapest.  The higher petrol goes, the more you save.

Have a think about how much you currently …

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Novated Lease Interest Rates

Going in to any finance arrangement you need to be aware of what kind of interest rates, terms and conditions you’ll be facing.

 

The Bad News

Novated lease rates are not going to be equivalent to mortgage rates because a novated lease often be over a shorter term and be a lower finance amount. Rates can depend on your personal circumstances – your income, assets, etc.  It will also depend on the type of car you are purchasing.  A used car, for example, will generally attract a higher interest rate.

But what about dealer or manufacturer specials – the special 0% finance deals, you …

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Novated Leases and Bad Credit

So you’ve got a bad credit rating. Maybe times were tough a few years ago or maybe you made a few bad decisions when you were younger. That’s the end of finance for you. Isn’t it?

Actually, it’s not.

The good news is that you still may be eligible for a novated lease despite your bad credit history. This means you can enjoy the benefits of a novated lease and a new car, just like everyone else. There’ll be no need to scrimp and save or busk on a street corner for some extra cash.

That shiny new car you want or perhaps …

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Maintained vs Non-Maintained Novated Leases

There are two types of novated leases: maintained and non-maintained.  So what is the difference?  In a nutshell, a fully maintained lease brings with it all the inclusions (fuel, servicing, insurance, etc) whereas a non-maintained lease covers the finance of the car and that’s about it.  We comprehensively cover the differences between maintained and non-maintained leases and what these both involve and will mean for you.

 

 

Fully Maintained Novated Lease

A fully maintained novated lease involves a set payment which is deducted from your pre-tax salary and covers not just the lease for the car but other car-related expenses.  This includes things …

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