What Are The Tax Benefits Of A Novated Lease?
Novated leasing is very popular in Australia, because of all the tax savings it could provide an employee with. At Vehicle Solutions, we aim to save our clients as much money as possible through our novated leasing.
Income Tax Savings
With novated leasing, the finance payments of your car are deducted from your pre-tax salary. It means, your taxable income will decrease and so will the income tax based on it.
To maximise your tax savings, Vehicle Solutions Australia also adds all the car running costs to the package, including fuel, all scheduled services, tyres, re-registration and insurance renewals. Covering these everyday costs from your pre-tax salary means you will end up paying even less income tax.
Vehicle Solutions gives you the option of adding or removing any of these running costs from your package at any time.
Savings on Goods and Services Tax
GST, the goods and services tax, is a value-added tax imposed on most goods or services sold for domestic use. With novated leasing, you will not pay GST on the purchase price of your car. It could save you thousands.
The novated leasing provider is obliged, by the Australian tax law, to pay the dealership the GST included in the purchase. However, the lease provider is then free to claim the full amount of the GST payment from the ATO. Therefore you, as the leaser, will not pay GST on your novated leased car.
The GST claim by the novated leasing provider is available on any car, new, demo or used. However, the vehicle cannot be more than ten years old at the end of the lease. A four-year-old car can be leased for six years only, for example. You can even arrange a lease-back on a vehicle you already own or have on finance to take advantage of the tax savings.
In Australia, private sellers are not required to remit GST on their sales transactions back to the government; only dealerships or car companies are obliged to do that. Hence, you will not be able to save on GST if your car was bought from a private seller.
However, you can save additionally on your car running costs if your employer’s novated leasing policy allowed your car to be regarded as a company car, for tax purposed. By doing this, your employer can claim back the GST paid on your car running costs. The tax savings will then be passed back to you. This is all covered under ATO guidelines used by all novated leasing companies, and could be applied to both new and used cars.
With novated leasing, you will get the tax benefits in every pay, rather than waiting till the end of the year. To learn more about the savings you could make on novated leasing, visit vehiclesolutions.com.au to use our online calculator. You may also contact us. Call us now!