S
Stuart Lamble
Guest
On 2005-12-22, Bleve <[email protected]> wrote:
> Is anyone else here amazed by the way novated leases work? My
> understanding is that they're basically a tax dodge for high income
> earners, that requires that the upperclass welfare recipient drive the
> car for at least 26,000km a year to keep the tax break.
>
> The people I know with novated leases drive *everywhere* simply because
> they have to get the k's. Insane ...
The logic is straightforward. If you lease a car, there are two ways of
working out the fringe benefits tax liability: a logbook (keep tabs of
what mileage is travelled, and what percentage is business related), and
statutory.
If you go with the logbook, you need to use the car primarily for
business use, or you get slammed with FBT. So most people opt for the
statutory option. With that, the logic goes, the more kms you travel,
the more likely it is that a significant proportion of them are business
related. So the more you drive, the less FBT you pay; there's a strong
incentive to try to get your mileage up over the statutory limits of
15,000 km; 25000 km; and 40000 km, especially if you're only a few km
short.
Having said all that, you can pay a portion of the running costs out of
post-tax salary. If you do that, the amount of FBT you get slugged with
goes down by the amount of post-tax dollars you put in. So if you're up
for $15,000 in FBT, you can pay $15,000 out of post-tax dollars, and
your FBT liability drops to nothing.
I looked at this as an option when I started full time work; I came to
the conclusion that I didn't drive enough to make it worthwhile, and I
didn't want to increase my driving to do so.
Note: just because I understand the logic of the reducing FBT costs
doesn't mean that I agree with the setup. We'd be better off without
novated leases, in my opinion.
--
My Usenet From: address now expires after two weeks. If you email me, and
the mail bounces, try changing the bit before the "@" to "usenet".
> Is anyone else here amazed by the way novated leases work? My
> understanding is that they're basically a tax dodge for high income
> earners, that requires that the upperclass welfare recipient drive the
> car for at least 26,000km a year to keep the tax break.
>
> The people I know with novated leases drive *everywhere* simply because
> they have to get the k's. Insane ...
The logic is straightforward. If you lease a car, there are two ways of
working out the fringe benefits tax liability: a logbook (keep tabs of
what mileage is travelled, and what percentage is business related), and
statutory.
If you go with the logbook, you need to use the car primarily for
business use, or you get slammed with FBT. So most people opt for the
statutory option. With that, the logic goes, the more kms you travel,
the more likely it is that a significant proportion of them are business
related. So the more you drive, the less FBT you pay; there's a strong
incentive to try to get your mileage up over the statutory limits of
15,000 km; 25000 km; and 40000 km, especially if you're only a few km
short.
Having said all that, you can pay a portion of the running costs out of
post-tax salary. If you do that, the amount of FBT you get slugged with
goes down by the amount of post-tax dollars you put in. So if you're up
for $15,000 in FBT, you can pay $15,000 out of post-tax dollars, and
your FBT liability drops to nothing.
I looked at this as an option when I started full time work; I came to
the conclusion that I didn't drive enough to make it worthwhile, and I
didn't want to increase my driving to do so.
Note: just because I understand the logic of the reducing FBT costs
doesn't mean that I agree with the setup. We'd be better off without
novated leases, in my opinion.
--
My Usenet From: address now expires after two weeks. If you email me, and
the mail bounces, try changing the bit before the "@" to "usenet".
