Novated lease on a car

[MW]

Discuss.

Got the opportunity to take a novated lease through work, but weighing up the pros and cons. If my new car is fully financed the pros are great on tax saving through the novated lease, especially EVs but if you can buy outright with cash, I would guess it is not worth doing the novated lease unless you want to use the cash for something else...

No simple answer online unfortunately

[Booney]

I'm given a car allowance outside / separate to my salary. I've never done a novated lease, I have always used finance for the vehicle.

I had previously used my allowance to finance, insure, service and fuel the car, nothing out of pocket. My last two I've upped the buy price of the car ( in a new Subaru Outback that's just done 1500kms ) and now pay for the insurance and registration out of our household budget. The aim is to have a car purchased for around $60-65k for the last 5 years of my working life and the allowance will pay it off and I drive away in it.

Tax man and I agree that this works well and neither of us ask for too much in return.

[MW]

Yeah think the logical thing is to speak to my tax man. Cheers.

[The Bedge]

I have a novated lease.. has upside, but not sure i'd do it again.

It's handy not worrying about fuel, maintenance, tyres, rego etc. costs given it's all included in your costings, and allows the Mrs to just do her thing.. but get your budget wrong and suddenly payments increase etc.. then you also have to consider the pay out value after 5yrs.

I also haven't worked out if there is anyway to get out of the agreement ahead of time.

Convenience: Yes
Cost: No

[Booney]

Exactly why I looked at finance.

I turn the car over every 3 years once depreciation kicks in and me and the ATO are all gucci.

[Brodlach]

I use my car solely for work, the tax deductions are fantastic

[dedja]

Yeah think the logical thing is to speak to my tax man. Cheers.

Best answer.

I novated 2 cars quite a while ago, it was all the rage then … was there a benefit? For me yes, but you have to consider a lot of variables to make it work.

The rules have significantly changed since then, and not for the better. I’d be surprised if it’s worthwhile for anyone these days, but your financial advisor (if they have expertise here) should be able to advise if it’s right for your situation.

The killer is FBT, which is actually an employer liability, but they almost always pass this cost into you.

[MW]

Yeah think the logical thing is to speak to my tax man. Cheers.

Best answer.

I novated 2 cars quite a while ago, it was all the rage then … was there a benefit? For me yes, but you have to consider a lot of variables to make it work.

The rules have significantly changed since then, and not for the better. I’d be surprised if it’s worthwhile for anyone these days, but your financial advisor (if they have expertise here) should be able to advise if it’s right for your situation.

The killer is FBT, which is actually an employer liability, but they almost always pass this cost into you.

Yes this is definitely passed onto us we were told

[Dutchy]

I have 2 novated lease going at the moment, one for our family car and one for my work car (although now told we are getting a work supplied vehicle).

It works great for us, I love the convenience of no other costs, just drop it off for a service, tyres etc and pick it up, insurance, rego, fuel, oil, car washes all taken care of. While petrol is included it still comes off your budget, so if you can get it cheap regularly you can actually get a credit back at the end of the lease, we are currently $2k in credit doing this. We will also make some $'s when it comes off in 2026 as the residual is $3.5k and it will be worth at least $8-9k by then.

Bedge - You can get a payout figure from your provider at any time, just shoot them an email.

There used to be some nice tax benefits but its only minimal now, I remember the days where you had to complete 20,000 kms pa otherwise you got stung with a FBT bill and that meant some guys were going for long pointless drives to the Eyre Peninsula for no other reason then to make sure they got over the line. Crazy that you had to burn fuel to save $'s.

[dedja]

‘minimal tax benefits’ … yep, the govt has all but closed them all down.

So you say it’s great for you, but how without any tax benefits, as that is what novated leases are all about?

[Jimmy_041]

‘minimal tax benefits’ … yep, the govt has all but closed them all down.

So you say it’s great for you, but how without any tax benefits, as that is what novated leases are all about?

I claim 93% of my car expenses on my tax

The trick is careful timing of your logbook

[dedja]

‘minimal tax benefits’ … yep, the govt has all but closed them all down.

So you say it’s great for you, but how without any tax benefits, as that is what novated leases are all about?

I claim 93% of my car expenses on my tax

The trick is careful timing of your logbook

That’s different from a novated lease though, which is an agreement between you and your employer to pay for a vehicle and associated expenses in pre-tax dollars, but has a FBT sting. The vehicle doesn’t need to be used for business purposes.

I assume what you’re doing is claiming the business use of a vehicle, which is governed by different tax laws.

I’ve used both on different occasions (Novated leasing and claiming business vehicle expenses) … the only thing in common is understanding the tax implications and using to your advantage.

I agree with the logbook timing, I did the same.

[Jimmy_041]

‘minimal tax benefits’ … yep, the govt has all but closed them all down.

So you say it’s great for you, but how without any tax benefits, as that is what novated leases are all about?

I claim 93% of my car expenses on my tax

The trick is careful timing of your logbook

That’s different from a novated lease though, which is an agreement between you and your employer to pay for a vehicle and associated expenses in pre-tax dollars, but has a FBT sting. The vehicle doesn’t need to be used for business purposes.

I assume what you’re doing is claiming the business use of a vehicle, which is governed by different tax laws.

I’ve used both on different occasions (Novated leasing and claiming business vehicle expenses) … the only thing in common is understanding the tax implications and using to your advantage.

I agree with the logbook timing, I did the same.

Doing the log book is a pain in the @ss
I was living in Sydney the last time I did it
It was brilliant - I only had to log about 10 days and it was, well......... 93% work
Lasts 5 years!

[Booney]

Log books are good, particularly if you time them around long weekends.

[Dutchy]

‘minimal tax benefits’ … yep, the govt has all but closed them all down.

So you say it’s great for you, but how without any tax benefits, as that is what novated leases are all about?

Still get a a portion taken out pre-tax which is still a positive, not as much there was though.

Personally I like the convenience of having all car expenses paid for. Im not a car person so the simpler the better for me.

[dedja]

… Personally I like the convenience of having all car expenses paid for. Im not a car person so the simpler the better for me.

My wife says the same …