I’ll list the exact details from our CFO’s spreadsheet to show how it works.
Details | $
|
Purchase Cost: | 39005.00
Lease Cost p/m | 624.12 (6.92% 4 yrs)
Residual | 13651.75 (35%)
Finance Cost (1)| 7489.44 p/a (excl GST)
|
Registration | 650
Insurance | 475
Fuel | 2700 (12L/100km, 75c/L,
| 30000km p/a
Maintenance | 880 p/a
Running Cost (2)| 4705 p/a
|
Fringe Benefit | 4290.55 (11% Pur Price)
Grossed up Amt | 8331.17
FBT (3)| 4040.62 (48.5% FBT rate)
|
Subtot (1+2+3) | 16235.06
Cost to Company | 11364.54 (30% tax rate)
|
Salary Sacrifice| 10426.18
Super Sacrifice | 938.36
After tax equiv.| 5369.48 (48.5% tax rate)
Note that I also have a super sacrifice of $938 which I didn’t mention earlier. I am also in the 48.5% tax bracket which makes the sacrifice less of a burden. The lease payments also include GST, but our company can claim that back again. Similarly for the fuel, I’m effectively getting that GST free. Also there is no GST on the original purchase price. The only time I have to pay GST is on the residual, but I could extend the lease by two years to zero residual if I wanted, which would eliminate GST altogether. I usually get a new vehicle every four years though.
The company is revenue neutral from the deal, ie it would cost them the same in total if I had no vehicle, and just took the extra wage and super. I end up with a reportable fringe benefit of $11,364 which would affect my superannuation surcharge if my wage were high enough (it isn’t because of my negatively geared IPs)
Hope this makes sense. It should to your accountant.
Regards, Jim.PS C2, the bank prefers a new vehicle, but they will accept a near new vehicle if you push it (I’m talking CBA here)
Note that you probably wouldn’t get the GST advantage on a used car. I’m effectively getting the vehicle for 9.09% (1/11th) discount to the price from the dealer. (not quite because rego doesn’t include full GST)Be sure you take note of the risk: “and if I leave the company, I have to take over the lease.” If you “leave” for another job, you can negotiate for your new employer to take over the lease. But if your current employer chooses the time for your departure and you don’t walk straight into another job, you’ll still have to make the lease payments out of your other income.
Same sort of risk as not being able to find a tenant for your IP, except that you have no equity and/or no possible capital gain.
Ghoti (twice retrenched; payer-out of ex-novated lease; immediate ex-owner of unrentable house; current big fan of cash in the bank [
])Sorry to hear about your woes Ghoti (fish?[
])
I’m part owner of our company, so I’m hopefully not going to get kicked out. (unless I keep spending so much time in this forum that is! [])
Jim.fullout,
Buy the car if you want. I had old cars all my life, and I bought a new one a couple of years ago- by loan, because I have never had enough money to have a decent car. With the recent increase in value in an IP, I am able to pay off my laon one year early! Authors like Anita Bell will tell you it is better to drive a torana and never spend a cent that isn’t related to property investment, but I am quite happy with my “bad debt” :o)
The real shockers and waste of money in a new car are the brandname services, depending on the type of car. Mine cost me 300 bucks, then 500, then 800, then 1200- ridiculous really. All in the name of having “log books” at the end of it. I killed off the services when they got too exxy- no problem there- it ran out of warranty anyway [
]Old cars can be scarey. I do a lot of travel and driving in fog or in inclement weather is like a horror movie in an old car.
And with regards to RE investing, a quality car can givre you a bit of “veneer credibility” with RE agents (if you’re into that sort of thing!)
Why wait until are 75 and you have all this wealth due to RE investing if you want to live well now? You can have a balance- live well and spend *some* on RE and some on yourself- for now- not as deferred satisfaction.
kay henry
Sorry to hear about your woes Ghoti (fish?[])
I’m part owner of our company, so I’m hopefully not going to get kicked out. (unless I keep spending so much time in this forum that is! [])
Jim.Thanks Doogs, but not really woes now: just experience <ahem>. The lease wasn’t on a car, but on a high-end laptop, so high that I used it effectively for over 4 years and impatiently for another one. Which was fortunate, because I paid way more for it than I should have and I’d have struggled to update it sooner.
I’d be reluctant to accept a novated lease as an employee again; but then I’d be reluctant to be an employee again at all – most of my contracting jobs lasted longer than my “permanent” ones and were generally less afflicted by manglement.
I think I’ve just gone way off topic.
Ghoti (Flying Fish to you [
])The topics a bit way off anyway Ghoti, so don’t worry about it. Anything that appeals to our basic materialistic instinct will always be an interesting topic.[
]With regard to laptops, I got mine with salary sacrifice. There is no FBT on laptops, so my company can get it GST free, and then we sacrifice our pre tax dollars for the rest. The end result is a laptop costing 47% of the retail price.
Jim.
With regard to laptops, I got mine with salary sacrifice. There is no FBT on laptops, so my company can get it GST free, and then we sacrifice our pre tax dollars for the rest. The end result is a laptop costing 47% of the retail price.
Jim.
OUCH!! Now that made me woeful [xx(]
Ghoti (still working on how to spell Flying)
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])
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