Using a novated lease FBT calculator can help you figure out how much income you can claim on your tax return. This can significantly affect how much you can afford to spend on your home.
Calculate your novated lease FBT
Using a novated lease arrangement can reduce an employee’s tax liability. However, a novated lease can also give rise to an FBT liability. The FBT is a tax generated when an employer benefits a staff member instead of a salary.
When an employee receives a novated lease, they can either use a statutory method or an operating cost method to calculate the novated lease FBT. The statutory process uses the car’s base value as the basis for calculating the taxable value. Similarly, an operating cost method uses the total costs of running the vehicle over a year.
The taxable value of a novated lease is calculated by multiplying the cost of the vehicle by a percentage. For example, a $20,000 car would be valued at $3,600.
The FBT is calculated using a 20% statutory percentage if an employee uses the statutory method. This means that if the employee uses the novated lease for 80% of the time, the taxable value will be $7000.
Employees can make post-tax contributions to the novated lease if they decide to use the operating cost method. These contributions are then used to offset the FBT liability.
The employee contribution method allows employees in the top marginal tax bracket to offset their FBT liability. This is a great way to maximise the tax savings of a novated lease.
Contribute towards the running cost
Using a novated lease to contribute towards the running cost of a vehicle can reduce your taxable income. In addition, the benefits of a novated lease include increased flexibility, convenience and more choice. These three benefits are beneficial for drivers who are looking to purchase a new vehicle.
A novated lease FBT calculator allows an employee to purchase a new car without borrowing money. Instead, the employer makes payments from the employee’s salary. These are deducted before the employee’s tax is calculated. This saves the employer money on FBT and provides the employee with better take-home pay.
While there are several different types of novated leases, the typical finance lease consists of two-thirds of the cost of the vehicle. The remaining amount is paid at the end of the term. In Australia, most novated leases are for five years or less.
A novated lease also reduces taxable income and payroll tax. Generally, the employer can claim back some of the GST that is paid on the vehicle’s running costs. In addition, the finance provider can also claim a tax credit for the input tax paid on the purchase price.
The novated lease may also provide the employee with greater productivity. In addition, it can allow the employee to purchase a better car for the same take-home pay.
Reduce your taxable income
Getting a car through a novated lease can be a great way to save money and reduce your taxable income. Buying a new or used car allows you to pay for the vehicle using pre-tax salary.
This can save you tens of thousands of dollars throughout your novated lease. In addition, this type of arrangement can help you to avoid Fringe Benefits Tax.
It’s important to remember that a novated lease will not be a one-size-fits-all solution. The tax advantages of this type of car finance will vary depending on your lease type.
If you’re thinking of purchasing a vehicle, you can get a good deal by shopping around. Some novated leases offer wholesale pricing on new cars. Others package insurance, fuel and registration.
Another benefit of a novated lease is the ability to terminate your lease early. A novated lease is a three-way agreement. It requires an employer, a finance provider and an employee. The employer pays for the vehicle in pre-tax dollars, the finance provider covers the GST, and the employee pays out the remaining obligations at the end of the lease.
It’s essential to understand the various deductibles. It’s also good to seek professional financial advice when considering this investment.
Using a Novated Lease FBT Calculator
Using a novated lease FBT calculator is an excellent way to ensure you get the best car finance arrangement deal. However, this is not a substitute for financial advice from an expert. You may also want to consider whether you are liable for Fringe Benefits Tax (FBT).
The Australian Tax Office (ATO) administers the fringe benefits tax. This tax is charged on non-cash benefits that an employer or associated party provides.