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nlc • novated lease • FBT and how it works
Cash (i.e. your salary or wage) and non-cash benefits (i.e. a car) are treated differently under the taxation system. Income Tax is payable on cash-benefits and Fringe Benefits Tax (FBT) is payable on most other types of employee benefits.
A Novated Lease is a car fringe benefit, because a car leased by your employer is made available for your private use. A car fringe benefit is one of the few salary-packaging items that receives concessional taxation treatment.
There are two methods for calculating the taxable value of a car fringe benefit: Statutory Formula Method or Operating Cost Method. The method selected will depend on the percentage of business use and your employer's vehicle policy. In consultation with you, we will determine the method which will result in the lowest taxable value.
If you mainly use your car for private travel*, the Statutory Formula Method produces a lower taxable value than the Operating Cost Method. (*In most instances, travel to and from work is considered private travel.)
Under the Statutory Formula Method a statutory percentage is applied to the base value (car purchase price) of the car. If you are purchasing a new car, the base value is the GST-inclusive purchase price, less stamp duty and registration costs.
The statutory percentages are shown in the following table:
| Total annual kms travelled | Statutory % |
|---|---|
| Less than 15, 000 | 26% |
| 15,000 to 24,999 | 20% |
| 25,000 to 40,000 | 11% |
| Over 40,000 | 7% |
(if allowed under your employer's vehicle policy*)
If there is a high percentage of business use, and only incidental private use, the Operating Cost Method produces a lower taxable value.
Under this method the total cost of operating the car is applied to the percentage of private use. The percentage of business use must be substantiated by log book and odometer records.
* Please contact your employer to confirm they allow FBT to be calculated using the Operating Cost Method.
If you would like further information on our services please contact us on:
03 8699 7000
1800 643 044
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