Finance

[Paranormal]

When I originally bought the T I wanted to use a Novated lease, as I'm a feild tech and use the car for work, a novated lease would have came off my pre tax income saving me money by reducing my taxable income etc, my employer original said no problems but then when faced with the paper work siad just let me call the accoutant who said although a novated lease is in my name the company is still seen as paying the lease at least whislt I'm still under their empoyment and advised against it as the company may be liable for capitol gains tax.

Anyway since it had already been approved by Ford Credit I just had them trasnfer it to a standard lease. This has increased my monthy payments and theres a $13,000 ballon payment at then end.

Yesterday I called a credit union and they advised if I say put down $8000 the monthly repayments would be roughly the same, infact a little less and no balloon payment.

So that's a $5000 saving over the same term.

Also if I had a home loan it could be attached over the 25yr home loan, but that's not applicable as I'm selling my unit at the moment.

So basically I seams to me that leasing costs a lot more, so wheres the benefit?

[richdave]

just let me call the accoutant who said although a novated lease is in my name the company is still seen as paying the lease at least whislt I'm still under their empoyment and advised against it as the company may be liable for capitol gains tax.

1. If you are quoting accurately, the accountant is a tosser. There would be NO Capital Gains Tax on such an arrangement as there would be NO capital GAIN.

2. If they said (meant) FBT (fringe benefits tax) then there would be a liability but you can pay that from either pre OR post tax depending on your income (you need independant advice here). The employer DOES NOT have to pay this on a novated lease although some do. The amount is actually linked to km's travelled

eg under 25K pa is 22% of base cost of car, over 25k and it is 11% over 40k and it is 7% IIRC.

Also the accountant forgot to mention that if the lease amount is deducted PRE tax than the salary they pay you is LESS for pay roll tax purposes so your employer actually SAVES money to by allowing you to novate.

Clearly your boss needs a better accountant, and unfortunately you were mis lead.

If you are using your car for work the best you can do is write off the % of bussines use on tax now.

Oh and some other benefits

Car is purchased GST free as employer claims it as a input credit. Running costs are the same - GST free as the employer also gets an input credit on any tax paid.

A personal loan on the other hand means you have to keep detailed records of costs, a log book for at least 12 weeks to determine business usage vs private use. then you claim depreciation (at 22% pa IIRC) and the % business of all running cost inc interest as a tax deduction. You still pay GST on the car and all operating exp though.

A private lease is similar in that you claim the % cost of the lease and operating exp as a tax deduction. again here you also pay GST on the car and all operating exp. The ONLY advantage I know of with these arrangements over the Novate option is that when you buy the car at the end you don't pay GST on the residual (or balloon) value.

So basically I seams to me that leasing costs a lot more, so wheres the benefit?

the lease payment is fully deductable as it is effectively a rental payment, whereas only the interest component of the loan payments are.

BTW - I'm no accountant but I do have novate lease with ALL costs deducted PRE tax so I believe I am correct in what I say here.

Edited 24/01/04 03:07 AM by richdave

[richdave]

This has increased my monthy payments and theres a $13,000 ballon payment at then end.

Yesterday I called a credit union and they advised if I say put down $8000 the monthly repayments would be roughly the same, infact a little less and no balloon payment.

So that's a $5000 saving over the same term.

the difference could be explained by a few things including

interest rates, fees/charges. but I'm guessing the main reason the lease cost went up when you transfrred to a novate lease was that now the car cost included the GST which also had to be financed.

[Paranormal]

Thanks Richdave that's very informative, and yes it was FBT he refered to, I'll take your advise to my own accountant and see what suits me best, you've been a great help also thank for the colour / avatar thing.

Para

[SJW]

Para,

You mentioned that putting it on your home loan was not an option for you at present.

There is no problem doing this and you find you can finance your car at home loan rates ( say 6.5% ) , but the debt then goes over the term of the loan.

To people who want the lower rate, you can have the best of both worlds by having a separate loan account for the car which is taken out for a reduced term. That way, your additional loan for the car is on the lower rate and you do not take 30 years to pay off the car. Could match the expected ownership of the car - say 5 years

I know it doesn't suit you if you are selling your unit, but something to consider the next time around.

[Dagabond]

Can you tell this is a favourite subject of Daves? :lol:

forrestd should be along soon.... :lol:

A bit more info Here

and something to consider if you dont do a lot of k's Here

Something I havent checked with my accountant about yet.

12 months ago when I first picked up my car it was supposed to go onto a novated lease work told me to pick it up on a normal lease and they'll have a look at it for a month or two then if it all seem's ok they'll swap it over to novated, I was basically stuffed around and given the cold shoulder until last week (kept at the borshtards weekly ).

Now that it has gone to novated the vehicle is effectively a secondhand car so there's no FBT payable as fuel k's travelled maintenance etc exceed what would be payable on FBT by a couple of hundred dollars.

Havent done the calculation's on what I've lost in the last 12 month's or how or if I'll gain anything from it in the next couple of year's, but I couldnt give a rat's a$$ as the fun of owning it far outway's any losses for me.

[richdave]

Now that it has gone to novated the vehicle is effectively a secondhand car so there's no FBT payable as fuel k's travelled maintenance etc exceed what would be payable on FBT by a couple of hundred dollars.

Havent done the calculation's on what I've lost in the last 12 month's or how or if I'll gain anything from it in the next couple of year's, but I couldnt give a rat's a$$ as the fun of owning it far outway's any losses for me.

Dags,

thanks I'd forgotten those threads. Hopefully they help Paranormal

You sure about the no FBT? If your employer is making a pre tax contribution OR you are salary sacrificing to pay the lease, then I thought there was still a FBT liabilty as you are still getting a "fringe benefit" I'd expect that the FBT base cost would be calculated on the depreciated price of the car. There would be no GST input credit though since the GST was payable by you not the employer at the start of the initial lease. There are still good tax effective savings for you and the running costs are still GST free.

BTW I changed employers and swapped my novated lease over after 8 months and the base cost of the car dropped from $41000 to $37000, saving me about $60 per month on FBT liability.

Hmmm... Just re-read you post, am I right in asuming you are paying for the fuel and maintenance post tax to offset the FBT? If so you may be better off having the running costs deducted pre tax AND the FBT liability also deducted pre tax depending on your income. Wheres an accountant when you need one... :lol: :lol:

My last employer took the FBT liability post tax where as my new employer takes the (reduced) FBT pre tax, effectively saving me $300/month post tax

Edited 24/01/04 06:07 AM by richdave

[hammer007]

Just to confuse things even more you can make post tax contributions equivalaent to the FBT amount and pay no FBT.

This is called the Employee Contribution Method - rather than retyping - have a gander at

http://forums.whirlpool.net.au/forum-repli...es.cfm?t=152529

[richdave]

Just to confuse things even more you can make post tax contributions equivalaent to the FBT amount and pay no FBT.

This is called the Employee Contribution Method - rather than retyping - have a gander at

http://forums.whirlpool.net.au/forum-repli...es.cfm?t=152529

I thought I said that.......but I didnt call it "the contribution method"

you are paying for the fuel and maintenance post tax to offset the FBT?

[Dagabond]

Hmmm... Just re-read you post, am I right in asuming you are paying for the fuel and maintenance post tax to offset the FBT? If so you may be better off having the running costs deducted pre tax AND the FBT liability also deducted pre tax depending on your income. Wheres an accountant when you need one...

Yup and unfortunately No, the current leasor and work wont accomodate pre tax deduction's. I'm waiting for this one to run it's course and then I'll move to another lease company.