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What is FBT on a Novated Lease?

What is FBT on a Novated Lease?

FBT on a Novated Lease

The calculation for FBT on a Novated Lease is now a simple 20% of the value of the vehicle before government registration and stamp duty. There are no longer restriction on how many km’s you need to travel. This means that for most Australian’s paying more than 20% marginal tax Salary Packaging a car on a Novated lease, now makes a lot of sense.

What is FBT?

When an employer provides a benefit to an employee in lieu of salary, the ATO regards this as a fringe benefit. They are non-cash benefits provided in lieu of salary or wages. In this context, by paying for your vehicle from pre-tax salary – the employer is providing you with a benefit.

A Fringe Benefits Tax (FBT) is a tax on these fringe benefits. It is designed to overcome past deficiencies in the income tax laws allowing employees to receive salary as tax free benefits.

FBT is assessed on an annual basis, with the FBT year running from 1 April to 31 March. While FBT is payable by the employer, the costs are passed on to the employee. Salary Packaging companies work this out for you. Then build the cost into your payroll deductions so you have no FBT liability at end of each FBT year. It is the salary packaging company’s job to ensure the FBT you pay is less than the income tax you would have paid. This means you save even more.

There are also a number of employers that have FBT exempt dollar limits on salary packaging. This simply means you are able to salary package anything up to a limit without paying FBT. These employers are Public Hospitals and charitable organisations.

Find out more and get a quote.

To find out more or to see how much you can save by Salary Packaging a car please call 1300 990 880 or get a quote from our online calculator.

ATO Link