Salary Sacrifice

[98ninja]

Has anyone here done Salary Sacrifice on a car?
Ive done my sums and it seems like a good thing but Im cynical.

[smithy5]

It's really a maths question, once you take into consideration all the expenses, which cannot be answered here without all the numbers....

However, If you are earning good $$$ and are going to buy an expensive vehicle with your after tax income anyway, then it's probably a good idea to salary sacrifice, reduce your gross taxable income, and still get the vehicle you want.

But me, i'd pay cash for an older vehicle, and invest my excess income elsewhere...

[Naked Twin]

I do it and like it as it allows me to buy anything to use as a company car (within reason and age). The only down side or issue is that you have to do a log book for 12 weeks once every 5 years and can only claim the percentage of work kilometres from your total expenses. That is if you only use the car for 85% work then you can only claim 85% of the running expense.

The upsides -
18.25% (or 18.75%) of the vehicles value as depreciation year on year
If you borrow money for the car, the interest is tax deductible
All expenses, and improvements are tax deductible
You can change cars whenever you want
You can spend as little or as much as you want, so long as the company states you need a car for work purposes
If you sell the car to your wife, husband or anyone else for less then what the depreciated value is you can also claim that. I bought a Golf GTi, kept it for 2 years then sold it to my wife for equal to a low ball trade in offer which was significantly less the depreciated value and is all completely above board. That way I was able to get her a near new car with all the services, upgrades done and then sell it for well below what I could buy one, all whilst claiming a tax deduction on the loss

Current car is a 4x4 that has had some additions and mods done to it, all able to be claimed. It will be getting a lift kit before I retire it.

If you are remotely dodgy, you can claim your bike fuel, tyres, the other half's car expenses etc. Of course I wouldn't recommend that

[98ninja]

I do it and like it as it allows me to buy anything to use as a company car (within reason and age). The only down side or issue is that you have to do a log book for 12 weeks once every 5 years and can only claim the percentage of work kilometres from your total expenses. That is if you only use the car for 85% work then you can only claim 85% of the running expense.

The upsides -
18.25% (or 18.75%) of the vehicles value as depreciation year on year
If you borrow money for the car, the interest is tax deductible
All expenses, and improvements are tax deductible
You can change cars whenever you want
You can spend as little or as much as you want, so long as the company states you need a car for work purposes
If you sell the car to your wife, husband or anyone else for less then what the depreciated value is you can also claim that. I bought a Golf GTi, kept it for 2 years then sold it to my wife for equal to a low ball trade in offer which was significantly less the depreciated value and is all completely above board. That way I was able to get her a near new car with all the services, upgrades done and then sell it for well below what I could buy one, all whilst claiming a tax deduction on the loss

Current car is a 4x4 that has had some additions and mods done to it, all able to be claimed. It will be getting a lift kit before I retire it.

If you are remotely dodgy, you can claim your bike fuel, tyres, the other half's car expenses etc. Of course I wouldn't recommend that

Is that for a dedicated work vehicle?
Mine would be for personal use

[Naked Twin]

Define dedicated work vehicle. My vehicle is registered for personal use. However as part of my package the company provides me with a company car or car allowance.

Might need to check with an accountant to be sure

[laidback]

I set up salary packaging (SP) for the health service I worked for. In some instances secondhand cars may be able to be included but age is/was restricted.
As stated before if you intend to buy a new vehicle this may be a benefit but if just doing it to take benefit of salary packaging there may be cheaper alternatives.

I'm sure some of the ways the deemed benefit is calculated is different these days so best to check further but this may give you an idea of questions to ask.
When I did it I packaged a car and all running costs and it was for my personal use only.

There are two relevant amounts.
1. The actual cost of the package - should include ALL running costs as well as the lease payment, fuel, servicing, rego, insurance and repairs etc etc. This amount is deducted from your gross salary so you don't pay income tax on this amount.

2. The benefit amount - not sure how this is calculated now but in my case it was 4% of the value of the car (excluding GST) as I travelled more than 25,000kms per year. This is what the FBT is calculated on and does not necessarily relate to the actual cost in any way.


If you can package a ute type vehicle with a carrying capacity of 1 ton or over there may not be any fringe benefit at all so no FB Tax is payable.
If you have someone from your company that coordinates it all your best bet is to get them to do a comparison with and without SP.

Complications can arise if you get paid by work for the use of your own car as under SP the car is technically owned by your employer so you do not incur any costs that you can offset against the payment.

It also depends on the industry you work in. Charities enjoy some great incentives as does public hospitals - or used to back in the day. hehehe

Can't think of anything else ATM....

[Glen]

Noone can answer this unless they know your specific circumstance.

Ultimately it depends on your marginal tax rate and your actual usage of the car ie business v personal. Everyones circumstance will be different. Be careful on the one tonne carrying capacity/no fbt myth. It only works in very limited circumstances. If the vehicle is available for your personal use it will be subject to FBT.

See a tax guy with all of your details and they'll be able to give you the best solution

[Naked Twin]

Noone can answer this unless they know your specific circumstance.

Ultimately it depends on your marginal tax rate and your actual usage of the car ie business v personal. Everyones circumstance will be different. Be careful on the one tonne carrying capacity/no fbt myth. It only works in very limited circumstances. If the vehicle is available for your personal use it will be subject to FBT.

See a tax guy with all of your details and they'll be able to give you the best solution

That is straight out wrong about FBT full stop. FBT is about your company supplying something to add to your employment package be it car, free trips, medical or similar, there are eligible vehicles and packages.

The one tonne limit got pushed out the window a decade ago, about the same time that the labour government signed up with the greens to ensure the local car market was killed off. What you didn't know is, no shit, this is fact. What happened was with FBt instead of the reducing rate based on klms which was as it had been, that is the higher Kim's your company car did the lower the tax rate, it became instead of a reducing rate at a the less you drove the more you had to pay at a much higher rate, unless you had a ute (no load limit and no FBT). So in short buy a ute and no FBT or sign up to a car allowance or salary sacrifice and the "tax" is paid as you go.

Don't believe me, I have done well over the last 9 years

[98ninja]

I was looking at buying an Iload or a Mercedes Vito. The karting bug has hit again and theres that many kangaroo's around here Im not keen
on road bike riding anymore so maybe ill get into dirt bikes as well. I could always buy a kart with a trailer, but Ive got to look at making a compromise on the kind of kart I buy that it comes with a trailer. I figure a van would fit karts, mountain bike and motorbikes with security over that of a trailer or a ute.
The nearest kart track to me is Tamworth or Lismore. I wouldnt mind having a go at Newcastle and Port Macquarie as well. So if the fuel is covered then thats a bonus.
I did some calculations of my own and it seems like itd cost me $70 a week more than it would cost me now.
Im going to go well over the 80k tax bracket due to a pay rise this year and as for my profession, I dont drive my personal car at all for it.
I guess what Im asking is that has anyone salary sacrificed and thought "geez that was a pain" for the term of the lease.

[Glen]

Check with a tax guy. If your employer provides you a maintained vehicle, sedan,ute van or otherwise and it is available for your private use it comes under the FBT regs. The amount will vary depending on your business v private use. We have 300 cars in our fleet of which about 30 are utes and they are all subject to FBT.

[kawasinley]

I was looking at buying an Iload or a Mercedes Vito. The karting bug has hit again and theres that many kangaroo's around here Im not keen
on road bike riding anymore so maybe ill get into dirt bikes as well. I could always buy a kart with a trailer, but Ive got to look at making a compromise on the kind of kart I buy that it comes with a trailer. I figure a van would fit karts, mountain bike and motorbikes with security over that of a trailer or a ute.
The nearest kart track to me is Tamworth or Lismore. I wouldnt mind having a go at Newcastle and Port Macquarie as well. So if the fuel is covered then thats a bonus.
I did some calculations of my own and it seems like itd cost me $70 a week more than it would cost me now.
Im going to go well over the 80k tax bracket due to a pay rise this year and as for my profession, I dont drive my personal car at all for it.
I guess what Im asking is that has anyone salary sacrificed and thought "geez that was a pain" for the term of the lease.

The salary sacrifice I've done is purely for private use.

The Novated Lease provider (don't work for them, usual disclaimer) SG Fleet and my employer allow a combo of pre-tax and post-tax salary deductions.

This has also opened up the possibility of buying (at the time) a four year old car that at the time was still the current model and had less than 50K on the clock.

As soneone else said, financing a used one in this way is up to the fleet provider but the big advantage is that the cost base for FBT was $35K instead of close to $60K being the cost of a newie.

Also means that as I've chosen a finance lease the residual due at the end is negligible.

When I bought the car this way I knew I was locking into a long term (5 years) transaction but as I knew I'd have no foreseeable reason to get rid of this car that's not a problem for me.

It also has a budgeted maintenance cost built in - if I underspend (and the fleet provider does the budgeting, not you) then what you've paid into this kitty but not spent then comes iff the residual due at the end of the contract.

Self service maintenance is not an option to keep this cost component down - contract says you must have services performed in accordance with schedule by an authorised mechanic.

I'm ahead on this deal as it's allowed me to have the car I want that I would otherwise not be able to afford (or justify, more to the point) without the pre-tax deductions.

[BrettZZR]

My GF has her car on salary sacrifice, and as far as I know, it makes a difference what work you do, and where you work as to what you can claim etc.

My 5c is if you were going to be buying a car like that anyway, makes huge sense. But to say because I can sacrifice it, I'm going to buy the Grange instead of the Commie is folly.

One other benefit is you don't pay any GST, not on purchase, or fuel, tyres etc...

(-8

[swabio-ACT]

Different employers have different SalSac terms etc, but in the end the ATO sets the rules.

I am onto my 4th sal sac vehicle three different employers, and it is a pretty good system, although not as good as it used to be (in my circumstances) without the different FBT brackets depending on the km's travelled.

You really have to do the sums to see if it fits your personal situation. It varies between fleet / finance companies substantially, so have a good look at all the companies you can use. Also don't look at the RRP of the vehicles etc, as the fleet discount also varies massively. So if there is a vehicle that you are keen on, get a quote for it.

If you have a trade in and don't want to sell it privately, then the fleet company can often help with that as part of the transaction, and they can often get a much better trade than you due to their relationship with the dealers and the volume of vehicles they sell. Most sales pers will quickly leave you alone in the dealership when you are doing your research, as there is no $$$ for them in negotiating a fleet price. They will have generally one dude who deals with the fleet sales etc, unless a big dealer then there might be a small team (ie 3!)

Get quotes, and do the sums!

Remember that often finance companies that finance novated leases apply the full interest to the loan at the commencement, and there will be a balloon payment at the end of your lease. If you are under budget at the end of your lease, then the remainder of the sal sac will be paid to you, via your payroll. If you want to have it applied to the balance, then there is a pretty complex calculation that is applied to ensure you meet your tax liability. Also, as your employer pays your FBT, a lot will require to you repay that to them (in the case of govt employers etc).

It can be a very good system, or a very expensive one if you get the wrong set up in the beginning. Also if you are not looking at staying in the same employer, look very carefully at the exit rules and portability of the package, as it can be a very $$$ move!

[BrettZZR]

To clarify:

... it makes a difference what work you do, and where you work as to what you can claim etc ...

My GF is a teacher so she can Salary Sac. However the ATO has different rules for teachers in the private school system to those at govvie schools.

Best plan is speak to any of the service providers, they will provide a spreadsheet based on all your details and your assumptions (eg mileage per annum) covering the life of the plan. Then (if your employer allows it) shop around the different service providers...

My GF elected to buy a base model small car, and run the finance / scheme over only 3 years.

(-8

[laidback]

My knowledge as I said is a bit old so this may no longer apply or may be different but something to think about as it may apply in different ways for you.

This may not apply to you, but in some instances when you add the Grossed Up taxable Value to your taxable income it can increase your deemed income for things such as child support payments, Medicare levy etc but as usual check with your accountant or workplace specialist or maybe even the lease provider if they provide an advisory service.