Novated - Maintained or Not Maintained

Discussion in 'Accounting, Tax & Legal' started by GA, 12th Dec, 2012.

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  1. GA

    GA New Member

    12th Dec, 2012
    Looking to buy/lease an Audi worth $69K (already paid deposit).
    I am looking for 5 year Novated Lease options and would like an advise on what Novated Lease option will work for me (make $120K base + bonuses + super).

    I have been reading benefits on each and being an IT consultant who travel a bit (mainly interstate but air travel) my situation involves driving to work, driving to client sites (4-5 times a month) or drive to airport (4-5 times a month). I have kept a log and looks like I do around 20,000Km+ per year but 4000-5000km directly related to work (or I can prove) but this depends on time of year as well.

    I think Novated but Non-maintained is better for me as because I travel interstate (air) I don't really use my vehicle for days I am away (talk about 2-3 months collectively) so I can get benefits of Novated (pre-tax) but control the costs and spend only when I use. I read that in this case one would need to keep all receipts (fuel, insurance, service, car wash etc. in case I need to submit it with at the end of FBT year for FBT reduction which in my case would $3000-$4000?

    I would also like to know cost or tax implications for both lease options.
  2. GregReid

    GregReid Well-Known Member

    13th Jul, 2009
    FBT is based on the purchase price and km's travelled in a year. It will be expensive on 20k km travel pa unless you work for an exempt or concessional company.

    I would question anyone wanting to spend $69k on a new vehicle which will drop in value rapidly irrespective of whether you lease or novate or buy outright.

    If novate, be aware of the risk of lower SGC paid on your behalf and make sure you know the FBT numbers. I suggest you get a good tax accountant to show the numbers and confirm with your employer that they will do it and the effect on your SCG before you commit either way. The risk of a novation is that if you leave the employer, the lease passes to you. It may work out cheaper if you lease it yourself and claim a portion of costs for business use. Also will depend on your own business structure as an IT consultant could be employed in a number of structures.