okay, so i'm looking to purchase a new car using a novated lease. I've gone from knowing sf about novated leases to knowing enough to ask some questions etc.. Now i know there are plenty of savvy people who frequent this site, so am hoping to pick your brains a bit and learn more. As a start, this is probably the best link around if you want to punch in your own numbers and get out a detailed quote/breakdown of how the lease might work in your own case: https://fleetpartners.catch-e.net.a...es/index.phpo?_module=Calculator&_page=Search Here is another useful link - simple one to show relationship between finance amount, residual, lease tenure, interest rate, lease payment. http://www.fincar.com.au/car-finance-calculators lol - i used this last one to work out the interest rate that a financier was using in their quote (they're usually loathe to mention/admit to what interest rate they charge) anway, based on the output you get from using the first link - i.e. the detailed breakdown i thought we could maybe explore a few issues. One of the issues which confuses me is that of GST for example. When you purchase the vehicle, you do not pay GST on the vehicle. Similarly, the running costs are GST free, eg petrol, services, rego, insurance etc. This used to be really simple in the "olden days" when there was no fringe benefits tax (FBT) ... back then you could novate lease your vehicle and pay for the entire cost of the vehicle financing as well as all running costs and pay no GST whatsoever on any of those costs, and there was also no GST payable in your lease payment deductions when you salary sacrifice - as the entire amount paid over into the lease account was with pre-tax dollars, and no GST is payable via pretax dollars. However, with the FBT it now works out better to pay a PORTION of the lease costs with post-tax dollars, and as far as i can understand- GST is payable on THIS PORTION of the lease deductions only. So for example, let's say that the monthly lease cost is $1000. If that all came out of pre-tax dollars (salary sacrifice) then there would be no GST payable. however, now it is tax beneficial to pay a certain specific portion of the lease costs with post-tax dollars (depending on a few factors of course) - for the sake of argument - let's say that is 25%. So now we pay the lease with $750 out of pre-tax dollars and $250 (25%) of the lease out of post-tax dollars. this is worked out such that the FBT owed is ZERO. So now one would then have to pay GST on the post-tax portion of the lease- i.e. on the $250 ... thus GST payable is $25. at least that's the way I UNDERSTAND this. I'm hoping that someone more intelligent than myself (which should be at least 3/4 of you people out there ) could explain the GST thingie to me... That's a start and hopefully this thread can grow into something that can educate others about how a novated lease can help you save money if you need to buy a new or second hand car.
Note that the above post was not meant to be a introduction to novated leases. it assumes that the reader knows the basics about a novated lease. Obviously saving on having to pay GST is a major benefit of a NL, but another big advantage is that one can use PRE-TAX dollars to pay for your transport, and this of course brings down your taxable income, so you end up paying less PAYE tax as you would have - thus resulting in a portion of the cost of your vehicle and running costs being payed for by tax saved. SAVVIE??? :lol:
Biggest problem I found with my lease (a few years ago so things have changed a bit) was the requirement to do a minimum of 25 000 kms or the FBT became prohibitive. The first year was fine but after that we didn't want to have to drive everywhere to make up the Kms so you ended up lending the car to people and driving for the sake of driving just to get kms up. I worked for an airline and got REALLY cheap airfares and we ended up driving to Canberra for a long weekend just to get the kms up - a waste of life just to save a few dollars! Unless you really really really want a brand new car - you can save far more real dollars by buying it yourself slightly second hand rather than leasing. malachii
thanks Malachii They "mileage" rules have changed somewhat in relation to FBT. Now it is immaterial whether you do 15000km or 25000 km - the FBT is still the same (20% i think). So now you only have to do 15000 km to make it worthwhile. The FBT liability can be reduced to zero by paying a certain portion of the lease cost with after tax dollars... this is what i'll be doing. in the end it is still worthwhile - due also to the GST exclusion on all costs. However - one thing to watch out for - most of the leasing companies trie to whisk you into a lease where they do all the "hard work" for you - which includes them sourcing the finance. Unfortunately then you usually end up paying around 11% (or more) interest - which will claw back a big portion of your gains from tax advantages. I'm going the do-it-yourself route where you source the finance yourself or with the help of a broker... but this way the company who organised the lease account into which your salary sacrifice payments are payed into dont offer much advice and support, so you have to have a decent understanding of how it all works...
Hi Yippe-Ki-Ya, Congrads on looking into the novated lease. With a novated lease, yes you pay GST however you also save the GST. Convoluted.... yes but let me use an example to explain. Dealer has a car for sale (drive away) @ $33,000 The financier pays the dealer $33k, they then claim the GST and establish your repayments on the excl GST amount. Those payments are then treated to GST. If the finance is set with a 50% residual, it would be 50% of the amount financed being $16,500 balloon (it includes GST) The FBT base value is established using the price paid for the car less rego and Stamp duty. (example $800 rego and $1000 stamp) So the FBT base would be $33000 - $1800 = $31,200 If you take all of the running costs for the year (incl GST) (lease, rego, fuel insurance etc etc) and lets say it comes to $13,200 Your employer covers the GST portion of $1200, and your up for the remaining $12,000 On a monthly basis the impact though payroll would be roughly $1000 Pre tax $480 ($1,000 - post tax) Post tax $520 (FBT base $31,200 * 20% / 12) *the post tax amount negates the Fringe Benefit to nil Hope it helps Regards Zenra
WOW!!! That's an impressive first post mate! It's almost like you joined to reply to my post thanks.... Anyway, i thought i had a handle on the GST thingie, but after reading your post i'm a bit confused again. The way i understand it - with above example: Dealer has a car for sale (drive away) @ $33,000 The financier pays the dealer $33k less GST ($30 000) as no GST is payable to the vendor on a car if purchasing on a novated lease If the finance is set with a 50% residual, it would be 50% of the amount financed being $15000 balloon (again - no GST). But, if you decide to pay out the residual at the end of the lease term (because you want to keep the car) - then your residual payment does indeed have GST added to it (because you're paying out the residual with after-tax dollars). However, if you decide to refinance the residual into a new NL, then the financed amount is only the $15 000 (no GST) The FBT base value is established using the price paid for the car less rego and Stamp duty. (example $800 rego and $1000 stamp) So the FBT base would be $30000 - $1800 = $28,200 [again - GST should not be included in this calculation] If you take all of the running costs for the year (incl GST) (lease, rego, fuel insurance etc etc) and lets say it comes to $13,200 Your employer covers the GST portion of $1200, and your up for the remaining $12,000 Again, that's not the way i understand it. With your NL petrolcard you should be able to purchase fuel directly for the excl GST amount - i.e. 10% cheaper. IF it happens that you end up paying full price (i.e. including GST) for fuel or for a service - then in that case you can claim back the FULL GST for those maintenance costs from your NL account. [This will then offset any GST payable on your NL account - which is 10% of your AFTER TAX contribution to the NL payment] On a monthly basis the impact though payroll would be roughly $1000 Pre tax $480 ($1,000 - post tax) Post tax $520 (FBT base $31,200 * 20% / 12) *the post tax amount negates the Fringe Benefit to nil thanks - this last bit summarises it very nicely! I guess the only part where my understanding differs from yours is about the GST. Could you please recheck what i've said and comment on the GST workings? thanks mate.
I just got a quote from a dealer - which tends to support my understanding of how the GST thingie works... It's a quote - which gives the driveaway price which i have to pay them in order to [surprise surprise] drive the car away and there's not one cent of GST in there... So this is the amount my financier needs to pay them in order for me to pick the car up. Bluddy good stuff! I'm chuffed
When I got one of my leases - I bought an ex army reserve vehicle which had 4820 kms on it and was 5 months old (don't stress - it was a blue falcon station wagon - not khaki or camo tank ) But it was 2/3 the cost of the brand new one. If you can handle a slightly second hand one - might be worth checking around the major car auction houses that dispose of ex government vehicles in your state. Mine was through Fowles in Melb and was fixed price - not auction so was really simple. malachii
lol i did There are two methods to calc the balloon either, purchase price Incl GST * residual % = Balloon incl GST | $33,000 * 50% = $16,500 or, finance amount * residual % = Balloon excl GST | $30,000 * 50% = $15,000 + GST = $16,500 I'm sure of the GST and the calc's as it's my day job PS the GST on all the running expenses is sorted via the fleet provider. If you fill up with a tank of fuel ie $100, the fleet provider pays the servo $100 and claims back the GST Charging the $90.90 ($100 excl GST) to the driver budget. Regards Zenra
Morning Yippe-Ki-Ya You might be interested in looking at the Web Calc, or the detailed sample.... The detailed sample will help you see how the numbers come together Regards Zenra
cheers mate for confirming all that stuff. I've learned a bit more today about how the GST works on the initial purchase price ... My financier does actually pay the dealer the total inclusive price (i.e. including GST) for the vehicle, although this is seemless and of no consequence to me as my repayments are calculated based soley on the net price (excluding GST). The reason for this is that once my financier has paid the dealership the full amount for the vehicle (including GST) the financier immediately claims all the GST back from the ATO. This is why the GST has no bearing whatsoever on my premium for the vehicle - it is calculated soley on the net price excluding GST. http://www.nlc.com.au/gst/ In particular: "Therefore the impact of GST on the purchase price of the car is a saving to you as you will only be financing the GST exclusive price of the car."
welcome Zenra, good first posts, love it.. lol,, yeah i am sure, its my day job.....priceless.. great info guys.
