I Work for a Novated Lease / salary sacrifice company (10 Years) and a Licenced Financial Adviser. Ask Me Anything
Yes I have seen all the dodgy stuff that goes around and no I'm not promoting any business. Nothing to gain, just like to educate.
[AMA] I Work for a Novated Lease / salary sacrifice company (10 Years) and a Licenced Financial Adviser. Ask Me Anything
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i work for a small business so no sorry
Just a comment on novated leasing. When I asked questions the interest rate in a novated lease was over 10%, I could get a car loan for less than 5% and this differential really ate into any prospective savings.
interest rates on NL are false. I don't recommend using them to compare like a loan or mortgage.
you need to compare the actually lease payment car only + running expenses with consideration of the tax savings as you can salary sacrifice some of it vs paying the loan repayments and running expenses in after tax for the same term
plus you don't pay GST on the novated lease payments and running expenses so one bonus (employer claims them)
You will however notice that all the online calculators that give you an estimated savings number are using the same finance source for both scenarios. So I think it's excessive to claim the interest rate is false (and a bit about my background I've been a chartered accountant for over 15 years so I'm not unfamiliar with numbers. ) Just do the calculations yourself between financing externally and a novated lease (including balloon payment) and dont rely on the online calculators.
agreed
i more meant misleading than false
e.g. provider could be on 7% and another one on 5% but some how the 7% is cheaper than than the 5% due to the 5% not fully disclosing something
Does it matter what the price is petrol is if you are on novated lease?
any advantage if you fill up on a cheap day or expensive day?Well if you fill up cheap you pay less
But I usually budget $1.60 a L as a buffer just a budget it can always become $2 a L one day
Unused funds you get back eventually
Hi
Can you enable PM?
Unused funds you get back eventually
How so?
at the end of the lease or should you feel like your account has too much money. you could tell the NL provider to send the pre-tax funds to payroll to be processed as wages and return to you
Is there any value in getting a novated lease on a used vehicle ?
Yes there is for the correct person
What calculation do I need to do to see if it is suitable for me?
You need a quote from your employers novated lease / salary provider and then you need to compare the quote to another method of purchasing the vehicle + running expenses for the same amount of time
Gday
I realised today that when I get my car serviced I ought to drop it off the on T=-1 and then pick it up on T=1.
This is so that I can claim that one whole day as when my car was not available for useI've been a noob and dropping it off on the morning and picking it up on the afternoon.
This way, I calculate i save an extra $10 for a vehicle with a base cost of $54000 for each day it is unavailable.
(Because i'm moving 1/365th of 20% of $54000 from post tax to pretax)Is my thinking correct?
If it's a week I don't need my car, can I extend the pick up until the week later? (As long as the service place is OK with it)
The calculation is incorrect but yes you got the concept. You know if you overpaid post tax due to eligible days unavailable for use. You can ask the provider to send you that amount from your funds to your nominated bank account. I would.
Some people actually need their cars but if I was the NL provider I would require you to provide the pick up and drop off date from the mechanic and that's the relaxed way without causing a fuss. The days unavailable is suppose to be worked on situations you had no choice over not really delaying pick up of your car even though it is ready. But I would give it to you for creativity.
Previouslu ATO had denied people days unavailable even though they were trapped in floods and bushfires. Their stance was it was available for use but the victims choose not to drive it. Pretty harsh.
I mean if you are really looking at getting reimbursed dodgy tax free money, there are plenty of other ways
:)
Sounds like I can't just delay it for profit.Well my car was actually unavailable for a week due to a warranty issue. How does the calculation work for that?
Base value X 20% X full days unavailable / days in FBT year = your post-tax credit for refund from existing funds
Note that some providers won't give it to you until the start of FBT year.
Oh and new FBT started today. If you haven't already submitted your days unavailable, most likely you have missed out because there are cut off times for every provider
@Poor Ass: I haven't yet submitted. The cutoff is 12th April for me.
Does the fact that my lease started part way through an fbt year affect anything? It started in June.
Thanks for the formula
@FoxJump: Only thing I can think of is if there was delay in your first contribution, you might have a post tax shortfall like most first year lease.
To work out how much post tax is required in the fbt year - ((Base value X 20% X (full days available / days in FBT year) - employee contribution or post tax contributed in the fbt year
hi, will getting a novated lease impact on borrowing power for home loan ? TIA
If you had a choice get the home loan first then the novated lease
Most home loan people just tell everyone to pay off the lease to increase borrowing capacity but is actually worse off as the potential tax savings are lost. People actually do it because they are desperate to get the home loan approved.
But if you got the novated lease first the liability is remaining lease payments plus residual and the asset would be the market value of the vehicle
Hi there,
Currently considering NL options.
My partner and I are downsizing to a one car household and going to get a newish car (Probably a 2017 Subaru Outback, $20k-ish).
I am on $85k a year plus an additional $25k per year rental income from my apartment.
My partner is on $110k a year plus another $20k per year rental income from her apartment.
We are both Government employees and can salary sacrifice (I am Federal and she is a State government employee).
We are trying to figure out how we would do this? Like one person does the salary sacrifice and the other pays a contribution of the post tax shortfall?
Any suggestions? Or who would be best placed to be the one that does the salary sacrifice? (We dont combine incomes btw or have joint accounts with the exception of our mortgage account).
Ok you need to use the amount after expenses for the rental not the gross
But the go is usually who ever has the higher income and doesn't cross to the income bracket below after sacrificing should do the NL. You guys are near the $90k bracket so she should do it to be safe to ensure the savings are well received in the $90-$180k bracket.
Federal or state no tax concessions unfortunately. Unless one of you work for hospital , ambulance or legal aide.
You can't split one person this one person that. Has to come from the same pay the pre and post which will payroll will send both before you get paid. Lease can be under one name but registration can be under both.
Your employers would have salary sacrifice providers in place already to get NL quotes so just ask your HR for their details. I could check the quote for you if you want just black out personal details
Oh and SS your super as well it may increase your take home pay as certain governments top up super for certain % the employee puts in
Hello, can you please help to understand why after-tax contribution is subject to GST?
What is the interest rate we should be negotiating?
Who is overall good NL service provider in Australia? ( reliable/honest and good customer services).
The after-tax contribution subject to gst because it is treated as income to the employer when the employee contributes it. So a registered gst entity need report the gst to the ato but at the same time the lease and running expenses they can also claim the gst so that you don't need to pay the gst for your expenses
No interest rate it is misleading. Ask for the actually lease repayment per month, how many payments in the term and the residual amount.
Well I am what you are looking for but I'm not selling. I find small business NL provider has better service than the well known ones listed on the stock exchange. Smart salary personally is the worse.
I understand you have recommended focusing on the monthly lease repayments for the vehicle only to compare NL's, and i understand that you think it will generally be more beneficial than a standard car loan. To compare a car loan vs NL monthly payments, what is the best way of doing this given the NL payments may be include pre-tax payments?
Without getting too complex the NL quote should tell you the cost in the home pay per pay cycle.
Use that and times by how many of them will be in the lease term + residual
And then
Compare the amount of repayments in the car loan for the same term + the recommended cost of the running expenses per pay cycle on the NL
This way you will get the NL vs loan with consideration of running expenses as well
Glad you posted. I’m in the lucky position where I can choose to use my salary sacrifice to pay off my mortgage or to spend it on a car. I’m looking at getting a new Tesla Model 3 when it’s released later this year, and charging at home 99% of the time. With no fueling costs and very little if any service costs, does this change the maths of the loan? Calculating $70k for the car, zero fuel and running costs over 5 years… or is it better that I use SS to pay off my mortgage and get a regular loan for the car (which also means I can put down a big deposit and have lower monthly payments).
2 things first
What is your salary and what is your employees FBT tax concession (you can look this up by typing the abn in abn look up)?
You can pm me
My head hurts… can you explain NL for dummies?
It's a way you can lease a vehicle (must purchase at the end by paying a set amount) with running expenses included over a set lease term using pre-tax (before tax wages) and post-tax (after-tax wages). Main incentive is tax savings involved compared to traditional methods of buying a car and funding the running expenses where it would be paid purely with after-tax money
So simple math wise - (BTW this is purely for curiosity and hypothetical)
Running costs come out of pre-tax income?
(Novated Lease)
Income = 95K
Repayments = ???? (what's the normal repayments to maximize tax incentives?)
Car Cost = 45K
Running costs = example???
- Fuel / Servicing / Rego / CTP etc
Opposed to (Cash Upfront):
Income = 95K
Tax = $24,092
After-tax income = $70,908
Car Cost = 45K (Cash upfront)
Running costs = same as above?? but out of "After-tax income"I don't work for this company but this calculator will help you compare https://www.toyota.com.au/finance/personal-car-finance/novat…
if you want to compare cash and want to use the running expenses on the calculator. Make sure you use drive away price of the vehicle and running expenses + 10% as the calculator doesn't include the GST on expenses.
Reason they don't include GST on the expenses is because it gets claimed through the employer and you don't pay GST on your expenses in a NL.
hope that heaps
note the interest rate is misleading what you put as the loan rate isn't really the same as the NL rate so FYI
It's basically middle class welfare that existed under the guise of 'protecting the local car industry'. But now that the car industry is gone why are all taxpayers still paying for the benefit of the few who benefit?
Because the vested interests, those that work in the salary packaging industry are great lobbyists and shell out thousands of dollars in bribes to both sides of the political spectrum.
https://www.smh.com.au/business/the-economy/labor-and-coalit…
I really hate that word "vested interests". It is used way too often to delegitimize debate.
NL is good because it helps with cost of living for employees. Period.
it costs the budget $500m a year and benefits only a few. Better to reduce taxes to all by $500m?
My wife makes good money but has bad credit due to being a guarantor on an ex's loan who went overseas after they split. it is paid off but the mark isn't going anywhere anytime soon. How difficult would it be for her to find a NL?
we have done many of those before in the same situation
when you apply for finance and be honest and say what happened and can show the default it has been paid in full
the financier takes that into consideration or they could approve your NL but restrict the amount they will lend to you (still better than nothing)
as far as I know if the NL provider takes care of their customers and would go that extra step to explain what had happen to the customer's past. the financier should approve it under special assessment
Thanks mate. Much appreciated. I'll pass the feedback on to her tonight :)
1) can i novated lease a 2nd hand vehicle from a private seller?
2) Is novated lease on a car worth it if i can pay for a car upfront? I.e. is the pre-tax savings (on 40% tax bracket - including medicare) outweigh the fees/interest of the lease?
yes but beware of possible mechanical issues current and future if beyond manufactures warranty period (might end up costing you)
yes sometimes it can beat cash but don't hope for it. I've explain it somewhere in the above posts. savings varies case by case but the overall goal is try to save more money compared to a basic loan. If you had the cash you could buy outright, but then you might have other plans for that cash instead and could do a NL instead to or improve cash flow e.g. pay lease and running expenses from each pay cycle rather than lose a lump sum at the start. note that running expenses are included in the lease so some of that will be paid from your before-tax wages compare to loans and cash would be pay for from all after-tax wages
Thanks for your honestly.
I have talked to several NL companies in the past. They have always provided calculations on how much savings I would gain over buying the car outright (cash). But I think NL only works out well if you go for an expensive car and travel a lot of business kilometres.
But for most people, NL may not be worth it. ie. if you had the cash, then buying a car outright is financially better overall.no no most clients don't do expensive cars
most common one are like mazda 3 and 15000km of travel
NL doesn't care for business km you can use it 100% private
You really need someone that would explain things properly and unfortunately most of those are sales people not actually technically or financially minded
In fact, I did some calculations on a lease - this is for my situation with no mortgage to offset (so any cash spent doesn't cost much - only the interest I'd get minux tax on that interest).
In my situation, the NL was more worthwhile for a lower priced car but less worthwhile for a higher priced car.
The basic reason for that is the balance between two factors in a NL:
1. Tax savings on maintenance.
2. Extra interest paid (which is partly offset by the tax deduction on the whole repayment). In my case, that extra interest was compared to the loss of interest I could have made by money in the bank.On the lower cost car, you don't pay as much extra interest, yet you still get the same tax benefits in relation to your ongoing costs.
For a higher priced car, you pay a that higher rate of interest and eventually (i.e., as the cost of the monthly lease payments goes up), that starts to outweigh the savings on the ongoing costs.
Is GAP cover worth it for cars like Mercedes or not required at all?
if it is brand new and you want peace of mind get life time new for old comprehensive insurance like suncorp has
GAP insurance is more cars that are older and beyond the new for old insurance cover (varies between insurers).. so lets say you owe $50k on the lease and you wrote off your car but the insurer will only pay $40k then you are out of pocket $10k. So gap insurance pays that 10k gap and the premium would need to be paid at the start of the lease and would varies gap insurer to insurer
What insurance company would recommend for NL? My current NL is going to generate me one for Suncorp. They also stated they can only claim up to $880 per year for insurance and the rest comes from my out of pocket.
they are really all the same but just need to read into what is offered in the policy
"can only claim up to $880 per year for insurance and the rest comes from my out of pocket" this doesn't sound right. Just tell them to increase the budget for the insurance and you'll be covered to get the premium reimbursed. might take some time for funds to build up though.
Could you quote your own suncorp and compare theirs? are you allow to use your own?
@Poor Ass: Just asked them if it was possible to increase the budget.
Yeah, I believe I can use which ever insurance of my choosing. I have to look at the policy if they cover NL.
Thanks for your help :)
@Injectors: Yep they will cover but you need to list the financer as an interested party in the insurance
hi op, could you recommend a NL provider ?
no but maybe use a small business over a well known one
big NL companies services tends to be a bit shit and people think they are cheaper because they have better bargaining power and that is also not true. most times they are more expensive
also your employer may already have a provider/s so you might be restricted by choice as well
luckily my company doesn't restrict NL provider, not sure why or how.
I got a quote from Smart Leasing but the consultant was too pushy and kinda put me off.
Some recommend Stratton Finance but have no idea if they are any good.
How do one find out about all these NL provider ? cant tell if one is small or well know to be honest or I may need to improve my googel search skill haha
not sure about Stratton they are owned by carsales… maybe read some reviews
lol stay away from smart salary… they don't know what they are doing and customer service is absolutely poor
I've had 3 instances that my clients used to be with them and when promised e.g. 3 year lease, they signed him up for 4 and all 3 didn't ready the paperwork and signed off
I deal with smart salary on a regular basis too and they don't admit their mistakes
wish I can help but I'm not selling myself.. good ones won't be on google reviews
it's really a punt… maybe ask if you see if you can see an example of their client login portal which shows transactions see if they have the technology to do that
Can you ELI5 what and how a novated lease works and why it exists?
I've never considered it mainly because it all sounds very complicated and I don't like to make financial decisions unless I know very clearly what I'm getting into.
Have answered this somewhere above. Time to go reading. Sorry
What added benefit do hospital workers get in relation to novated leases?
If your not using your cap limit already .. you can do a NL vehicle up to the value of around $41k and do it all 100% with before tax wages and that also includes running expenses
Does employer super contribution get reduced too with salary sacrifice?
Usually the employee doesn't pay you less super if you SS
But if they are pricks they can legally just pay you super based on the reduce salary so there is a possibility. Just ask.
Say i get a novated lease through my company and put down i do say 30,000kms a year. Would the FBT be effected if 20% of my driving was work related and could be claimed that way on tax?
Once you are doing a NL you can't claim anything on your tax return because you are already received a tax benefit from salary sacrificing.
However if you have work related parking, tolls, that kind of travel you can put them on your tax return as the NL don't include them
For a Commercial lease for a self employed what is the best interest rate and what company would you recommend
I want to get a x7
I'm not experienced in commercial leases so I cannot make any recommendations. Sorry about that.
no worries, what is a decent interest rate for any car loan IYO
I don't do them but I would pick something around 5% no more than 6% and then reputation would be the next deciding factor
Hi, imrichkid, I don't need no Novated Lease, thank you.
haha
Dear OP,
I have two questions about getting Life Insurance, TPD and Income Protection.
What are the upsides and downsides to getting the mentioned insurances through a financial advisor, compared to a broker?
How come some brokers quote (much) less premuims in comparison with the financial advisors, for the exact same product? (I can PM you the name of the broker)
Thanks in advance.
to be honest don't use both… work it out yourself and buy it through your super. quite simple once you know how much you need
I guess broker just sells you the product without considering your personal circumstance (general advice) besides from how much coverage you need
Adviser could be personal advice in which they don't get commissions for selling the product (not allowed) but would give you a big bill for the advice provided to you to assess your personal circumstances and how to act based on information you have provided
Yes same product generally… some variations through different providers
So different between the two is adviser is a tailored suit and broker is like shopping at Lowes
Thanks charuzu,
I see your point. Only problem with Super is that it can't be own occupation, or so I've been told last year by an advisor.
Interesting point about advisors not being allowed to get commissions for the product. Is this a new regulation? The advisor I dealt with last year didn't charge me for providing the quote, but he explicitly said he would get commissions! I didn't go through with him in the end anyway
you know you could always call your super fund and you don't need to ask an adviser what you can and cannot do… will save you a lot of money
if it is fee for personal financial advice the adviser can't receive commissions because they are not selling you anything just recommending what you should do. but yes if it is not fee for advice and they sell you something then yes they will get cut backs
I mean, they already told you what to do you just need to stick with the plan… why would you want them to setup your super when you are do it for free
I'm negotiating novated leases for my employees/organisation with a provider, what are the top things we should try and get included in the contract to make it beneficial for us, ie, what is the lowest finance rate we can get the provider down to, any other good pointers?
Legally you have to offer at least 2 providers to employees to avoid getting in trouble third line forcing is a type of exclusive dealing and us illegal unless you are on the exempt list
Rates are misleading and I doubt you can negotiate a rate as they vary depending on many factors. Ask for dummy quotes to compare with other companies to check pricing. Also note sometimes NL providers don't do business with you if you have less than set number of employees working. Pick smaller companies over larger ones
Offer self maintain lease with running expenses only and not fully maintained leases. Provider would have negative restrictions on fully maintained e.g. employee forced to use their insurance and pay what they want them to pay, so don't offer those.
Be default finance should be car only without rubbish insurances unless employee is explained what they are and suit their needs
Admin fee less than $8 a fortnight if possible
Ask the employer when the gst and fbt reports will be sent
Get employer to fully disclose all fees including commissions they make on writing a deal. This will give you a feel if they are hiding anything.
All the best
Thank you, a few good pointers, appreciate it.
Does an NL exist that will actually benefit someone in my situation?
Work in mining.
85k salary + roughly 15-20% bonus.
Rent covered
Have and love my cheap shitbox car, barely pay any petrol as most travel is done in a work car.
Single, no kids, living expenses extremely low.Workmates and companies keep trying to convince me to take on an NL, there are a few companies linked into ours that advertise, but anytime I actually give it the time of day and check it seems like it will just cost me more, or require me to spend unnecessarily (eg a better car).
So to put it more simply, is there an NL for the frugal?
If you own your shitbox outright and it doesn't have any major issues, keeping that would save you more money than taking out a NL as you are taking on new debt in return for a better car.
If you need a new or used car to replace the shitbox one day, then that's when you should explore into a novated lease
It's sort of like kitchen appliances… there are some that does 3 things but you already have 1 of each machine that does those 3 things separately and they all work. Do you spend and replace and receive that short term happiness or do you keep existing appliances which does the same job and save yourself some money.
Also same as those people that upgrade smart phones unnecessarily
you see my point
Hey thanks for the reply. I guess its a no to NL for me for now then.
Ever done an Associate Lease? Where are the pitfalls?
I don't do them but it works out good if you have someone that is willing to set it up for you. but it's kinda of dodgy paying lease payments to your partner and getting a tax benefit
pitfall is that it would only work if the spouse had very low or no income
some legality issues as well
just a heads up for anyone planning on taking out a lease. negotiate for capped priced servicing if getting the car through the lease comapny who buy it at fleet prices which do not come with capped priced servicing. other option is to go to a dealer and negotiate the car yourself then contact the leaseing company to do the rest. apparently no cap prIced servicing on fleet vechicles cuz all the savings are in the fleet pricing discount of the car which is BS.
Depends on the manufacturer… Leasing company has no power when it comes to servicing. They are just purely in finance and account management.
Like Toyota you can get fleet pricing and cap price servicing. But most brands on fleet discount you can't get fixed price because the purchase price is heavily discounted. Would you rather save thousands on the purchase price or $100-$200 on each service?
TBH fixed price servicing isn't really the shit. Sometimes it's cheaper to pay for a regular logbook service outside fixed price servicing
Whenever I see NL providers doing financial comparisons for why a NL is better, they are comparing figures to someone financing the car themselves. I asked if they can do a comparison to someone buying it outright and they said they don't do such a comparison.
At the end of the day you are paying a maintenance/admin fee to the NL provider + financing costs (interest + fees) so would need to recoup this back in tax savings before you're in the green. The only way to do this is by spending more (ie using the car more) and saving GST on petrol, tyres, maintenance etc. So NL would be more favourable to those who use their cars more often
I compare NL vs buying the car outright with cash vs car loan
If it doesn't work out I tell them so even if I lose the deal… Not really in my best interest to hard sell nor am I desperate
Keep in mind that 99% of NL providers are not financial advisers and just simply sell a product like a salesman would they don't need to take into consideration everyone's personal circumstance
Everyone's circumstance is different… I've written deals that people do only 2000km a year and it worked out. But it's not for everyone that is true.
Do you have any jobs or internships for people with a completed DFP?