Drive your salary package further
The second in this series about salary packaging looks at novated leases.

By Maria Cavallo, SmartSalary

There are tax benefits of a car on a novated lease agreement.

Photo by CPL Cameron Jamieson

ONE OF the most commonly packaged benefits is a vehicle through a novated lease. Almost 3500 ADO members are currently taking advantage of this benefit.

Under a novated lease agreement, you can lease a vehicle for an agreed period of time ranging from one to five years.

The vehicle is for private use and can be new or used, depending on the conditions set by each novated lease financier.

The ADO has established an approved panel of novated lease financiers to provide you with a choice of companies with extensive experience in salary packaging car benefits.

Each approved financier has varying conditions under which they will offer finance and/or vehicles. As with any major purchase, you should compare services offered by more than one provider before proceeding.

A list of current approved novated lease providers is available from the Novated Lease Benefit Profile and/or the Salary Packaging Handbook that have been created with SmartSalary, the ADO’s salary packaging administrator.

The Profile and Handbook are located on the SmartSalary web site, www.smartsalary.com.au.

Once on the web site, you can access the area for ADO members by entering the employer code ADO. Why is packaging a vehicle through a novated lease advantageous? It can potentially increase your effective take-home pay by up to a few thousand dollars.

This is because all payments (lease, fuel and oil, maintenance, registration, insurance and CTP insurance, road service membership, car wash and stamp duty) are classed as exempt from fringe benefits tax and can be paid from pre-tax dollars.

Defence pays for you any GST associated with these. It is important to note that a novated lease is subject to an additional fringe benefits tax which you are liable to pay.

The amount of tax payable is dependent on the distance travelled each tax year and the price you pay for the car. Ultimately, the more you drive, the lower the amount of tax you will have to pay.

The tax payable is calculated on a concessional formula and, based on your driving pattern, may be far more beneficial than financing the vehicle outside of your salary package.

It is possible to reduce your fringe benefit tax liability to zero by paying a portion of running costs from “after tax” salary.

Salary packaging a vehicle through a novated lease is optional and, though it may provide you with attractive remuneration, your personal circumstances will determine how it affects you individually.

You should first talk with your accountant or financial adviser before entering into a novated lease agreement. A list of approved financial advisers can also be found in the Salary Packaging Handbook located on the Smart- Salary web site.

These independent financial advisers are familiar with salary packaging and can help you to understand whether packaging a vehicle through a novated lease will be advantageous to you.

For more assistance, contact the SmartSalary Customer Service Centre via email at ado@smartsalary.com.au or by phone on 1800 632 496.

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