Free Fuel and Other Perks?

[sutty]

If you go the whole hog and hire purchase or lease a car in the company name, then everything becomes pre-tax expense, but you are then subject to Fringe Benefits Tax and all the headache that goes with it. If the use of the car is mainly for business then this could still be an advantage, even with FBT. You have to keep a logbook for a period to calculate what percentage of use is business and personal. The drawback is that the personal component is taxed at the top marginal tax rate.

I am not an accountant; I am only talking from my personal experience. I would suggest you talk to an accountant, but you should be able to get yourself a better deal.

I am not an accountant either, but this is what I believe about FBT.

FBT only comes into play if the car is used for private use. If you have a ute, you can have a small amount of private use without being liable for FBT.

You can get around FBT and actually end up with more in your pocket at the end of the day by paying a certain amount of your running expenses out of your own pocket. If you use the car largely for work, keep a log book and the FBT liability will be low. My car is mainly private use so I use the percentage/klms (statutory formula) to calculate the FBT liability and this is the amount I pay out of my own pocket to negate the FBT.

0-15000k's 26% of cars base value

15-25000 22%

25-40000 11%

over 40000 7%

Lumpy,

If you are in a high tax bracket, you would be able to get a new T for around the same 'out of pocket cost' that you have now. However, if you get cashies or are in a low tax bracket, a lease would not be tax effective. When I did my first lease, I went from an XF (owned outright) to a near new EF and ended up with more money in my pocket at the end of the day. NB: you can lease second hand cars as well as long as they are less than 4 years old.

The bottom line, talk to your accountant as the guys have said and there's no need to understand all the bull mentioned above

Phil.

[Macktheknife]

Get with the accountant Lumpen.

Methinks we can see a TUTE coming up somewhere in the future.

Go babay go..........

[Lumpen]

This means I have to find an accountant...and accountants cost money....

I shall find somebody no doubt.

I'm pretty pissed off about all this working for yourself business.If I sat at home and used Plonkies taxes to buy me some Dole Bikkies and get tuff stickers I would be (literally) 500% better off than what I am at the moment,but having nowhere near the amount of fun

At the moment it appears as if leasing is out of the question (for a while) but Im sure Mr Accountant will explain more.

Thanks for all your help guys.

[ubyte]

Essentially to be better off (more money in your pocket) you need to do more then 15K per year on your car to get your money back or at the very least break even

0-15000k's - Costs you more (then private ownership)

15-25000 - You past break even point and get even slightly get ahead

25-40000 - Get slightly ahead

over 40000 - Get further ahead

If the FBT rates change (which they are tiped to do this year regardless of who wins the federal elections), you will need to be doing 25K + a year to see benefits.

All in all you need to be on a high wage really to see any benefits at all. The whole reason you go into these arrangements is to reduce your taxable threshold of captital.

[Mondie]

Ubyte, what you have said is true only if the car is used for private purposes. Lumpy will be using the car for a signifcant amount of business use so its a different scenario for him.

Good info on FBT rising, obviously to reduce the popularity of leasing which is very common these days.

[ubyte]

Mondie, yeah true with private use.

I guess at the end of the day, you can still own the car privately, keep a log book for business use and claim business use at tax time. That way you dont have to worry about leasing, FBT rates and get a nice rebates come tax time...