ATO Novated Lease: Novated Leasing Benefits
Novated leasing is one of the most cost-effective car ownership solutions available to Australians, bundling your vehicle and running costs into one payment that is deducted directly from your pre-tax salary. Plus, it offers great fleet discounts and GST savings!
The ATO novated lease has launched a data matching program to verify whether novated lease deductions are being claimed properly, which involves gathering employee identification details and other providers of novated leases.
Tax Benefits
Novated leasing provides many advantages. First and foremost is saving GST when purchasing the vehicle; secondly, there’s no FBT due to running costs such as fuel, insurance, registration and servicing.
ATO novated lease salary packaging a car involves your employer deducting an amount from your pre-tax income and paying it directly to a finance company for its lease fee and running costs, such as fuel, tyres, servicing, registration renewal and insurance renewal fees.
So you can drive a new car that would otherwise be unaffordable while saving thousands in taxes each year, all thanks to novated leasing. Just remember: at the end of each novated lease term (known as “balloon payments” by some), there will be a residual value payment due that reflects its market value at the time of termination set forth by ATO regulations.
Fringe Benefits Tax
Various tax-saving strategies are available, such as claiming car allowance and charitable donations or paying private health insurance premiums. But to truly lower your income tax bill, salary packaging your novated lease could be one of the best strategies available.
Novated leasing packages combine your vehicle purchase with running costs such as financing, insurance, registration and fuel – all paid out of pre-tax dollars – creating fleet discounts, GST savings and reduced taxable income.
Fringe Benefits Tax (FBT) may apply when receiving a novated lease from an employer. However, it only becomes payable if no prior levies had been levied against this type of remuneration from them. Liabilities for FBT depend on a statutory formula that considers distance travelled for work and personal purposes by your business; each dollar contributed after tax will reduce this liability dollar for dollar up to the annual maximum limit of $58,000.
Residual Value
Residual value refers to a minimum amount owed at the end of a lease term; it’s determined by the Australian Tax Office to prevent capital advantages and tax breaks from accruing too quickly.
Employees leasing through novated leasing will benefit from wholesale pricing on their new vehicle. They will avoid GST payments altogether, saving over 10% in terms of purchasing price and operating costs – just another reason that novated leasing makes such good financial sense!
ATO novated lease provides savings and can help employees reduce their taxable income and lower their income tax bill. Payments made for the novated lease agreement are combined into one payment deducted directly from an employee’s pre-tax salary; those wanting to avoid income tax should discuss this option with their accountant to see if this solution could work.
Residual Payment
Novated leases involve the Australian Taxation Office calculating a residual or balloon payment based on an expected market value for the vehicle at the end of the lease and providing a minimum residual value. Most cars in the second hand car market sell for more than this value.
Novated leasing provides an efficient way of covering car costs such as finance, fuel, registration, insurance and maintenance – saving thousands in income tax, extra fleet discounts, and GST savings.
Working closely with your novated leasing provider to set a reasonable residual or balloon payment will help you reap maximum financial gain from your lease agreement.
A novated lease is an arrangement between you, your employer and a financier that allows you to sacrifice all or some of your car expenses to reduce your taxable income. In return, you lease the vehicle from the financier on a monthly basis for a set term and mileage limit.