Your employer deducts a portion of your finance payments and vehicle running costs from your pre-tax salary, so you pay less tax and have more money to spend on payday.
Because a novated lease is a benefit provided by your employer, it attracts Fringe Benefits Tax (FBT). However, we split your deductions between your pre- and post-tax salary which offsets your FBT liability, so in most cases there’ll be no FBT to pay.
Here’s an example of how it works for John – an office worker who earns an annual gross salary of $85,000.
With a car loan, John purchases his car for the advertised cost, and makes his car loan payments and pays his running costs from his post-tax salary.
However, with a novated lease, he makes a payment to cover his car finance and all his running costs before he receives his salary. Part of this payment is deducted from his post-tax salary so that he doesn’t have to pay any Fringe Benefits Tax. The remaining amount comes from his pre-tax salary. Salary Solutions also uses its buying power to secure John a great price on his new car, and he pays no GST on the purchase price, instantly saving 10%. John’s employer passes on the GST savings on the finance payments and the running costs of his car, so John goes on saving throughout his lease.
John chooses a Toyota Camry Altise which costs $26,490 drive away.
|With a Car Loan||With a Novated Lease|
|John’s salary||85,000||John’s salary||85,000|
|Pre-tax payment||Pre-tax payment||4,620|
|John’s taxable salary||85,000||John’s taxable salary||80,380|
|Tax and Medicare||20,872||Tax and Medicare||19,278|
|Salary after tax||64,128||Salary after tax||61,050|
|Johns car loan payment*||7,332||John’s after-tax payment||5,030|
|John’s running costs||4,553|
|Money available after car costs||52,243||Money available after car costs||56,020|
|Extra money with novated leasing per year||3,777|
*Car loan rate 10% (effective rate) pa, 5 year lease, NL rate 9.73% (effective rate) pa
John will receive over $3,777 extra a year with novated leasing!