Category: Car Leasing (page 1 of 1)

In the pursuit of sustainable living and eco-friendly transportation options, novated lease electric cars have emerged as a promising solution. More and more people and companies are turning to electric vehicles (EVs) as an alternative to gasoline or diesel-powered cars because they have concerns about climate change and want to cut down on carbon emissions. Novated leasing offers a unique opportunity to access electric vehicles while enjoying significant financial benefits. In this article, we delve into the advantages of a novated lease electric car and its role in fostering a greener future.

Understanding Novated Leasing:

Before delving into the specifics of novated lease electric cars, it’s essential to understand what novated leasing entails. A novated lease is a type of car financing arrangement commonly used in Australia. It involves a three-way agreement between an employer, an employee, and a finance company. The employee leases the vehicle, and the lease payments are deducted from their pre-tax income, with the employer facilitating these deductions. This arrangement provides tax benefits and can be a cost-effective way to access a vehicle.

The Rise of Electric Vehicles:

As concerns over environmental sustainability grow, electric vehicles have gained traction as a cleaner and greener alternative to traditional internal combustion engine vehicles. Electric cars use reusable batteries to power them, so they don’t put any pollution into the air. Because of this, they are a good choice for people and companies that want to lower their carbon footprint and help slow down climate change.

Advantages of Novated Lease Electric Cars:

• Financial Savings:

One of the primary advantages of opting for a novated lease electric car is the potential for significant cost savings. With novated leasing, lease payments, along with other vehicle-related expenses such as maintenance, insurance, and fuel, are deducted from the employee’s pre-tax income. This can result in extensive tax savings over the lease term, making electric cars a financially appealing option.

• Reduced Operating Costs:

The costs of running an electric car are usually less than those of a gasoline or diesel car. EV owners can save money on upkeep and repairs because their cars don’t need oil changes or as many moving parts. For most cars, electricity is also cheaper than gasoline or diesel fuel, which lowers the overall cost of ownership over time.

• Environmental Benefits:

By driving an electric vehicle, novated lease electric car holders can significantly reduce their carbon footprint. Unlike conventional vehicles, electric cars produce zero tailpipe emissions, leading to cleaner air and reduced greenhouse gas emissions. Choosing an electric vehicle through novated leasing supports with corporate sustainability objectives and demonstrates a commitment to environmental stewardship.

• Incentives and Rebates:

Many governments and local authorities offer enticements and rebates to encourage the adoption of electric vehicles. These incentives may include tax credits, rebates on vehicle purchases, and exemptions from road tolls or congestion charges. Novated lease electric car holders may be eligible to take benefit of these incentives, further enhancing the financial appeal of electric vehicles.

• Future-Proofing:

As governments worldwide implement stricter emissions regulations and phase out petrol and diesel vehicles, investing in electric cars through novated leasing offers a degree of future-proofing. By transitioning to electric vehicles now, individuals and businesses can adapt to evolving regulations and consumer preferences, ensuring long-term viability and sustainability.

• Enhanced Corporate Image:

For businesses, embracing novated lease electric cars can enhance their corporate image and reputation as environmentally responsible entities. Demonstrating a commitment to sustainability through the adoption of electric vehicles can attract environmentally conscious customers, investors, and employees, fostering goodwill and brand loyalty.

Overcoming Challenges:

While novated lease electric cars offer numerous advantages, it’s essential to admit and address potential challenges. Range anxiety, limited charging infrastructure, and higher upfront costs are some of the factors that may deter individuals from opting for electric vehicles. However, advancements in battery technology, expansion of charging networks, and decreasing costs of EVs are steadily mitigating these challenges, making electric cars increasingly accessible and practical.

A novated lease electric car represents a compelling explanation for individuals and businesses seeking to embrace sustainability while enjoying financial benefits. With lower operating costs, environmental advantages, and tax savings, electric vehicles leased through novated arrangements offer a win-win proposition. By making the switch to electric cars, novated lease holders can contribute to building a greener future while reaping the rewards of cost-effective and eco-friendly mobility solutions. As the world changes towards a sustainable transportation paradigm, innovatively leased electric cars are poised to play a essential role in driving positive change on both individual and societal levels.

The employer must consider three factors when considering FBT on a novated lease. First, the cost base of the leased car, the cost of the car’s operating costs, and the FBT rate are all important in calculating the tax-deductible amount for a novated lease. The cost base value is the car’s purchase price, including GST and compulsory third-party insurance.

Employee Contribution Method (ECM) reduces the taxable value of the novated lease to zero.

ECM reduces the taxable value of a novated lease to zero by making post-tax contributions to the leased vehicle. If the leased vehicle is not used for business purposes, the post-tax contributions are offset against the FBT payable on the lease. The post-tax contributions may be used throughout the FBT year.

The ECM reduces the taxable value of a novated lease to zero by allowing the leaseholder to contribute post-tax funds for the running costs of the leased vehicle. This is done through a fully maintained lease that requires the employee to keep the logbook and the car in good working condition. Consider checking how novated lease FBT calculator helps. 

Another way to reduce a novated lease’s taxable value to zero is salary packaging. Salary packaging allows employees to deduct a substantial portion of the leasing cost from their net salary, which means less FBT for the employer.

The statutory formula method reduces the taxable value to zero

A novated lease is a special type in which the employee enters a lease for a car and then transfers the lease to the employer to unlock tax concessions. The employer then takes responsibility for the employee’s car rental expenses and offsets this against the employee’s salary. In addition, the novated lease can be cancelled at any time.

Depending on the lease agreement’s terms, the employer will be liable to pay FBT on the car. The FBT rate is based on the car’s cost and the days the employee uses the car for private purposes. In the current FBT regime, FBT on the vehicle costs 20 per cent.

However, this rule does not apply to every type of lease. For example, the statutory formula method reduces the taxable value to zero in a novated lease if the employee has contributed to the car’s running costs. However, this method is only effective if the employee has contributed more than six thousand dollars in salary.

The employee Contribution Method method reduces the taxable value to zero.

The Employee Contribution Method is a great way to reduce the taxable value of your leased car. This method requires the employee to pay a percentage of the car’s running cost from their salary. The employee must also maintain a logbook and keep the car in good condition. Following the Employee Contribution Method can reduce your FBT to zero.

There are two ways to calculate FBT for motor vehicles: Statutory Method and Operating Cost Method. Unfortunately, if your car is under $37,000, you may be unable to take advantage of the lower tax bracket. Also, the ATO has made it mandatory for employees to pay residual values for cars. However, some ways to avoid this include leasing a new car and selling your old one.

When considering the benefits of salary packaging and novated leases, it’s important to understand how fringe benefits are taxed. Fringe benefits are any benefits an employer or associated company provides to its employees. They can also include any third-party benefits provided to employees under an arrangement with an employer. In either case, a novated lease will be treated as a fringe benefit and may be subject to FBT.

To calculate FBT, you need to calculate the car’s taxable value. The value of the car is usually the purchase price. However, in some cases, it can be a lower value, depending on the use. You can use the statutory formula or calculate it using the operating cost method. To determine the taxable value, you’ll need to calculate the total operating expenses associated with the car, then divide the total amount by the number of private kilometres the car is used. This method will require more calculations and logbooks than the former.