thread: novated lease

  1. #1
    BellyBelly Member

    Sep 2007

    novated lease

    We're going to be getting a second car soon, probably used, but someone mentioned getting a car on a novated lease the other day. Does anyone have a car on a novated lease? Is it worthwhile, ie do you save much money? Does it affect your tax return at the end of the year? And does it affect your fta and ftb payments at all?

  2. #2
    Registered User

    Dec 2005
    In Bankworld with Barbara

    We have a novated lease for our car. It's been great. We used it as a salary sacrifice to lower DH's taxable income. It's worked well for us, but when we looked into it and did the sums, it wasn't worth it as a salary sacrifice if you earnt under $60k per year. It's hard to see any savings you make, because it's all on your tax, so you wont see any effect until you have your tax done and your taxable income isn't as high. It does cost a lot per month - we pay $1800 per month for it, which is the car repayment and all running costs for the car included in that - so fuel, rego, insurance, tyres, maintenance etc. You get a fuel card so you charge the fuel back to your lease company. That might seem like a lot, but if you have any funds at the end of the lease period that are not spent, then they give that back to you. If you need new tyres or maintenance done on it, you have to get a purchase order from the company and they pay the account direct, or you pay and then they will reimburse you the money. this also applies for rego and insurance. The only big thing is that you have to nominate a set number of KM's per year that you expect to travel. If you don't reach the target km's, then you will lose any fringe benefits tax saving you might have had. We nominated 25,000kms per year and I currently do about 30,000. So you have to be sure of how many kms you drive on average per year - not much point nominating 40,000km's if you live in a highly urban area and don't travel much. We haven't found it affects FTB at all - it's still counted as part of your taxable income, so you have to tell centrelink how much money you spend per year on fringe benefits - so for us it's just over $20k. One catch is the balloon payment at the end of your lease. Ours is $10,000 for our car and you have to have that money there in a lump sum to pay out your lease and fully own your vehicle at the end of it. Oh and the other thing is that with a leased vehicle, you have to have it registered and insured as a Business vehicle, not private use, so this will increase the cost of your insurance etc.

    So while it is good, it's not a huge money saver. This is because when you pay the monthly amount, it takes out all that they need to allocate for all the various things during the year. But if you just got a loan and brought a car yourself, it would be less money per month because you are only paying for the car, not for all the other things like fuel and tyres etc. But it is good knowing that if you do need new tyres or need something fixed, then you don't have to actually have the cash yourself because it is already in the 'kitty' so to speak

  3. #3
    Registered User

    Apr 2008

    We can salary sacrifice through my work and are able to doa noavted lease but have chosen to do SS towards our mortgage. I would assume if you are doing it through your employer as part of your salary or salaray sacrafice that it would be considered a fringe benefit. Fringe benefits do affect FTB

    My father has a novated lease and I know for him at the end of the lease he purchases the car and then sells it on making a decent profit. Obviously the profit has tax implications and would affect any centrelink payments

  4. #4

    Dec 2006

    The novated lease company are used to answering these questions - you could contact them.

    We have always done it - DH does very high kms and it also reduces his taxable salary. BUT - the rules have changed recently and once this lease runs out we won't be doing it again, as there will no longer be a tax benefit.

    One tip though - our novated lease company always rolls the insurance cost into the quote. We always pull it out and get our own insurance as they seem to charge an absolute fortune for insurance, and we manage to get it ourselves a whole lot cheaper. They still 'pay' for it though - we just send in the receipt.

  5. #5
    Registered User

    Feb 2011
    New South Wales

    As Lenny said, there have been significant changes to Fringe Benefits Tax that impact upon novated leases- we won't be getting another lease once ours runs out. It's a good idea to discuss your lease in detail with your accountant before you sign on the dotted line.

  6. #6
    Registered User

    Dec 2007

    We have my car on a novated lease. trillian has explained how it works really well..

    DH is now in a high tax bracket, so when we needed a new car, it seemed logical to get it and lower his tax a little. I also did it for budgeting purposes. We know it is a set amount per fortnight with no hidden costs or bills like rego to pay as it is paid to the lease company and they pay for us. Not sure about you, but for me, even though I know they are coming, I am always struggling to find the money to pay them. Whereas if the money isn't in my account, I can't spend it.

    It isn't necessarily the cheapest way to buy a car and pay running costs, but it can work well in some situations.

  7. #7
    BellyBelly Life Subscriber

    Feb 2006

    We've had novated lease cars for about 6 years until DH changed company's last year and we had to come off it, but we're waiting for it tomgomback o to novated lease, it works for us with DH salary bracket

  8. #8
    Registered User

    Jan 2008

    We are doing it at the moment. Basically because we needed the bigger car but didn't have $40000 sitting around. Would we do it again....probably not. We struggle to do 20000kms a year tho. If we did more or would work better