Hope this helps :)
"The Contribution Method has been developed to provide an additional method of structuring a Novated Lease that will benefit those employees whose income is not in the top marginal tax paying level.
This method can run in tandem with your existing program and enables a far broader range of salary levels to benefit from Novated Leasing while actually improving the benefit levels some employees now experience.
To date most Novated Lease programs have functioned using the 'Statutory Formula Method'. With this method the total running costs of a vehicle along with a 'grossed up' fringe benefit tax (FBT) component were added together to become the Annual Salary Sacrifice amount. This amount was then deducted from an employee's gross salary and held by the employer for the purposes of paying the vehicle running cost expenses and F.B.T.
The F.B.T. component in this method is charged to the employee at the top marginal tax rate regardless of the actual salary being paid. This has the effect of limiting the use of the Novated Lease to those employees whose salary was greater than $50,000 p.a. (at which the top marginal rate cuts in).
However, with the changes that occurred to the personal tax scales under the New Tax System, the top marginal rate does not commence until a salary of $60,000 is achieved. This has resulted in around 80% of all tax payers being be in the 30% tax bracket.
Under the Statutory Fraction method this tax restructure marginalised the benefits that could accrue to employees involved in a Novated Lease whose salary is under the $60,000 mark.
Given the above, SMB NovaLease set about investigating alternatives to the Statutory Fraction Method that could maintain or improve benefits to employees without significantly increasing the administration for our client companies.
The alternative arrived at is the Contribution Method.
The Contribution Method is well established in tax law and allows an employee to make a contribution towards the running costs of their motor vehicle from their After Tax (Nett) Salary.
For every after tax dollar that an employee contributes to the running cost of their vehicle they reduce the FBT liability on the vehicle by the same amount.
In practice, this means that, as a substitute for FBT, an after tax contribution may be paid by an individual Employee up to the amount of FBT that would be required under the Statutory Fraction Method.
For example: An employee is driving a $30,000 vehicle 20,000 kms p.a. (FBT rate = 20% for this level of travel).
The employee may contribute $6,000 p.a. ($30,000 X 20%) toward the running costs of the vehicle and completely remove the F.B.T. that would otherwise have been payable.
The employee may then Salary Sacrifice the remaining running costs from their pre tax salary without any additional F.B.T. being incurred.
Calculations show that the benefits provided by using the Contribution Method are an improvement on the previous arrangements (Statutory Fraction) for many employees, particularly under the new tax regime. "
1. cars only:
General intro to motor vehicle packaging
The actual novated lease calculator
2. more general:
Custom fleet, with Fleetcard (discounts on petrol, etc):
Salary Packaging calcs: NAB and Custom Fleet:
CCH Software product:
MCMS Salary Package Modeller online: