PFP will review the best options when purchasing motor vehicles. The most common motor vehicle leases are:
Leasing your motor vehicles doesn’t tie up your valuable capital and repayments can be structured to your budget over a period of 1 – 5 years. Your taxation advisor should assist you with the details on planning an effective tax position.
No deposit is required. Tax benefits give the borrower the full benefits of depreciation and interest. GST however is claimed by the lender, not the borrower. Therefore, amount financed is pre-GST thereby keeping monthly repayments lower. The borrower also has the ability to make advance lease payments for tax deduction purposes.
Businesses registered for GST using Accrual accounting can claim the GST as a lump sum on their next Business Activity Statement (BAS). Businesses using Cash accounting can claim the GST in installments over the term of the contract.
At the end of the term of the Novated Lease, the employee has the option to purchase the car for a residual amount, or the motor vehicle can be traded in or sold.
Types of Novated Leases are a fully maintained car lease where all the operating costs of the vehicle area covered by the lender, or a Non Maintained Novated Car Lease where the employee is responsible for all operating expenses associated with the vehicle.
Novated Leases are also available for motorbikes, operating leases and fully maintained Novated Operating Leases. GST is charged on the monthly lease rental and can be claimed as an Input Credit by the employer, provided they are registered for GST.
GST is also charged on the residual value on the lease which becomes the responsibility of the employee when the Novation Lease reverts back to the employee at the end of the lease.
Fringe Benefits Tax (FBT) is payable on the vehicle and is generally passed onto the employee. The amount of FBT depends on the distance travelled each year. The higher the kilometres, the lower the FBT.
The main benefit for businesses using Cash accounting is the ability to claim GST paid on the purchase price of the vehicle price as an input credit on their next Business Activity Statement (BAS).