Novated Lease.

[Bain]

Novate leasing a ute = no FBT

If the business owns the Ute = taxable item

Business novates ute = pre tax and GST benefit heaven.

Edited 16/01/06 10:09 PM by Bain

[jetute]

you can write off 100% as long as its an expense... ie, tyres, mechanical etc and also all interest that you pay on the vehicle when under finance.... lease is best as for the first 2 years or so yu pay interest only (or there abouts), meaning that you can write off all your payments. When you start to hit the principle amount of the vehicle its time to chnage into a new ute so that the payments are always fully deductible (as long as u do not lose out on changeover).

I have a painting business and did this with my ute..... after getting rid of the ute and doing my tax.. the ute did not cost me a cent well it did, it cost me just under $600 a month, but the way I look at it is I was just lay-by-ing my tax

This may not be 100% correct but its pretty close

[Ford Grunt]

Whether you can obtain a novated lease will depend on your business structure, ill explain:

The word novated actually refers to the type of agreement that you sign with your employer being a "novation agreement" which is simply an agreement which your employer signs to agree to pay for your lease payments (and hence create a car fringe benefit to salary sacrifice). Otherwise a novated lease is simply the same as a ordinary lease only difference is the novation agreement.

Novated leases are generally only used by employees of others peoples businesses such as me I am an accountant working for an accounting firm which I don't own. So to obtain the benefits of salary packaging I a novate lease a ute.

Therefore if you have no employer than you can't get sign a novation agreement.

However, if you operate your business through a trust or company then they can be your "employer" (as these are seperate legal entities for taxation purposes), therefore can't do if use partnership or sole trader structure.

You could otherwise buy via a car loan or hire purchase or chattel mortgage or lease the vehicle in the business name (regardless of the entity)but...

if you can novate lease it (if you structure allows) it gives you the full flexibility so you can purchase it in your own name at the end, sell it, make a profit from sale (often done) and profit will not be assessed for tax where it would if the vehicle was owned in the business name.

Otherwise your business could purchase it at the end and depreciate the vehicle for further deductions (ie depreciation).

You need to remember that when the novate lease agreement ends by way of ceasation of lease or cancellation of agreement, the ability to package (and hence effectively claim deductions) also ends.

I've helped out a few people on novated leases including on utes. There are a few things regarding private use on utes to watch for when, see this thread for more info: http://www.fordxr6turbo.com/forum/index.php?showtopic=17497

And by the way, the full lease payment will be deductable if salary packaged or in a business name.

Hopes this helps,

Ford Grunt (Ben)

[F6 UTE]

I have a Car allowance paid to me through my business. The ute is on a Commercial HP. A car allowance allows any car to be used, and is 100% deductable if used 100% for business.. ( what car isn't that's claimed on tax???? )

$15k a year covers all repayments and servicing/tyres, and I pay bugger all tax on the $15K.. Company pays for fuel.

Advantage is I don't 'pay' for a car out of my own pocket. In a round-a-bout way.

This was set up to minimise tax on my personal income, and costs to the business, but I might switch to a system where the business owns/runs the ute.. Not sure yet..

[Flukey]

I have a Car allowance paid to me through my business. The ute is on a Commercial HP. A car allowance allows any car to be used, and is 100% deductable if used 100% for business.. ( what car isn't that's claimed on tax???? )

The difference here I think is your vehicle is a ute, meaning they are classified as a trades/commercial vehicle and 100% deductable. They are also exempt from FBT.

Different story for a 4-door .

[F6 UTE]

I have a Car allowance paid to me through my business. The ute is on a Commercial HP. A car allowance allows any car to be used, and is 100% deductable if used 100% for business.. ( what car isn't that's claimed on tax???? )

<{POST_SNAPBACK}>

The difference here I think is your vehicle is a ute, meaning they are classified as a trades/commercial vehicle and 100% deductable. They are also exempt from FBT.

Different story for a 4-door .

<{POST_SNAPBACK}>

Nope.. Car allowance = deductions. Just keep a log book for 3 months, presto..

[Eugene]

I have a Car allowance paid to me through my business. The ute is on a Commercial HP. A car allowance allows any car to be used, and is 100% deductable if used 100% for business.. ( what car isn't that's claimed on tax???? )

$15k a year covers all repayments and servicing/tyres, and I pay bugger all tax on the $15K..  Company pays for fuel.

Advantage is I don't 'pay' for a car out of my own pocket. In a round-a-bout way.

This was set up to minimise tax on my personal income, and costs to the business, but I might switch to a system where the business owns/runs the ute.. Not sure yet..

<{POST_SNAPBACK}>

I am set up the same,

I get a car allowance, Tax free.

I "own" the ute, 100% work use, (earhtmoving industry), all payments, maintenance, repairs, TUNES, replacment intercoolers, exhausts, injectors etc are Tax deductable, by me.

Company pays for fuel, tyres and service's.

My allowance is about $10.6k per, my "costs" inc all of the above were about $16k. nice little tax benifit for me at 48.5 cents in the dollar.

Mmmm, time to start getting all the reciepts together for this year.

[Falchoon]

Whether you can obtain a novated lease will depend on your business structure, ill explain:

The word novated actually refers to the type of agreement that you sign with your employer being a "novation agreement" which is simply an agreement which your employer signs to agree to pay for your lease payments (and hence create a car fringe benefit to salary sacrifice). Otherwise a novated lease is simply the same as a ordinary lease only difference is the novation agreement.

Novated leases are generally only used by employees of others peoples businesses such as me I am an accountant working for an accounting firm which I don't own. So to obtain the benefits of salary packaging I a novate lease a ute.

Therefore if you have no employer than you can't get sign a novation agreement.

However, if you operate your business through a trust or company then they can be your "employer" (as these are seperate legal entities for taxation purposes), therefore can't do if use partnership or sole trader structure.

OK, I might of been confused by the term "novated". I thought that was an "all inclusive" lease ie vehicle payment, petrol, tyres and servicing.

You could otherwise buy via a car loan or hire purchase or chattel mortgage or lease the vehicle in the business name (regardless of the entity)but...

if you can novate lease it (if you structure allows) it gives you the full flexibility so you can purchase it in your own name at the end, sell it, make a profit from sale (often done) and profit will not be assessed for tax where it would if the vehicle was owned in the business name.

Otherwise your business could purchase it at the end and depreciate the vehicle for further deductions (ie depreciation).

You need to remember that when the novate lease agreement ends by way of ceasation of lease or cancellation of agreement, the ability to package (and hence effectively claim deductions) also ends.

I've helped out a few people on novated leases including on utes. There are a few things regarding private use on utes to watch for when, see this thread for more info: http://www.fordxr6turbo.com/forum/index.php?showtopic=17497

Thanks Ben, I rember that previous thread, some more good info in there.

I was actually enquiring for a friend, not sure of his exact financial details and plans. Just know he has a work van on some sort of payment plan at the moment but his accountant says he can only claim interest. 100% work use.

And by the way, the full lease payment will be deductable if salary packaged or in a business name.

Hopes this helps,

Ford Grunt (Ben)

<{POST_SNAPBACK}>

That was what I thought. Don't know why his accountant isn't suggesting stuff like this to him.

Thanks Ben.

[Ford Grunt]

OK, I might of been confused by the term "novated". I thought that was an "all inclusive" lease ie vehicle payment, petrol, tyres and servicing.

This is referred to as a "fully maintained lease" which could also have a novation agreement attached to it.

Thanks Ben, I rember that previous thread, some more good info in there. 

Thanks mate, just like to help fellow members to sort through some the unknowns.

I was actually enquiring for a friend, not sure of his exact financial details and plans. Just know he has a work van on some sort of payment plan at the moment but his accountant says he can only claim interest. 100% work use.

That was what I thought. Don't know why his accountant isn't suggesting stuff like this to him.

Thanks Ben.

I suggest he change accoutants then...

Glad I could help. I have always have a special interest in vehicles and hence in vehicle packaging.

I personally package 3 vehicles, a modified a '03 BAXR6T ute (modified when I bought it) a '99 AUXR6 and a '80 v8 Fairmont Ghia.

Cheers,

Ford Grunt

[Schmooth]

Ben,

Maybe you can shed some light on vehicle lease financing (not just novated leases).

I came across a nice little earner for the lease company (and/or their financiers) the other day. I'm 1 year into a 3 year novated lease on a Mk1 T. With the runout sales on I thought it would be a good opportunity to upgrade to a new MkII and (slightly) reduce costs (extra day of child care per week adds up!).

I found, before closing the deal thankfully, that the exit cost from the lease was astronomical! They basically calculate the exit price by looking at what is still owed on the capital, and add on all the interest you WOULD have paid had you kept the lease for the full term! And this was even in light of the fact that I would have been leasing the new car through the same company, so they would have still been getting money out of me (can't change companies as it is an exclsuive deal with the employer)!

Is that a legitimate way to structure the financing of the vehicle?

Adrian