Have you got a car provided to you from your employer? Who is getting the benefit you or the employer?
(Lol. Sounds like an ad.)
Thought Id drop this to arouse some people to another way to purchase a car (other than going to a bank yourself) and is tax effective which means you will effectively increase you net pay after car expenses and reduce the tax you pay assuming your employer will package a car for you in the way decribed below.
The tables attached show that an increase in annual salary by $2,201 (eg1) and $4,409 (eg2) per annum was made by just having your employer provide you a car (using a novated lease) instead of you providing it yourself for a sacrifice in your net pay.
There are a number of factors that will increase or decrease the benefit such as your annual gross salary, cost of the car, the running expenses, your total klms travelled, total business klms travelled and how much expenses you pay yourself.
It is more likely to be a potential benefit where:
1. The car cost is low (particularly below about $57,000)
2. You have high klms (particularly where more than 25,000) and/or where you high business klms.
3. You pay before tax is high (particularly where higher than $60,000)
There may be a benefit because via your employer you get your car costs effectively with no GST (if registered for GST)
Thus say fuel expenses initially costing $110 end up costing you only $100 taken from your before tax pay (ie. $110 - $10 GST).
Note if you had of paid them yourself they would NOT be able to claim back the GST (ie. $10) because you are not carrying on a business so it would cost you $110.
But who gets the $10? You or your employer?
If your employer does not do this per the example above YOU ARE BEING RIPPED OFF
, because otherwise the employer will take $110 off your pay when it only costs them $100 ie $10 goes to the employer.
You also save on income tax because your gross wage before tax in reduced by $100!
The downside is Fringe Benefits Tax, which may leave you with no benefit depending on your circumstances (ie factors stated above)
Facts of example1
Cost of Car $30,000 (incl GST)
Annual Klms travelled 25,001 (no business use all private use)
Annual Salary $35,000 (excluding super)
Employer pays ALL car related expenses
Facts of example2
Same as 1 except Annual Salary is $70,000
I’ve provided the worksheets used to calculate the benefit for those interested. BE WARNED THE ATTACHED IS HEAVY
I’m sorry people I have to disclaim myself so someone doesn’t try to sue my butt off, to say that this is not advice and if interested you should see your accountant or financial adviser.
This stuff is pretty heavy, but u don’t need to understand the whole thing just that there may be a potential benefit to you.
Note that the benefits increase (with all factors remaining constant) as you salary increases, this may be due to the difference marginal tax rates applied at each income level.
Ie. in eg 1 excess (over $20,000) is taxed at 30% while eg 2 excess (over $60,000) taxed at 47%.
Give us your thoughts anyways, just trying to help you people increase your pay as there is big savings to be made, interested to hear any replies.
(Ps Im an accountant)