streetfleet novated leasing guide

Transcription

1 streetfleet novated leasing guide Drive your business further

2

3 Contents About this guide 1 What is a novated lease? 2 Novated finance lease 2 Novated operating lease 3 Lease inclusions 4 Service and maintenance 4 Replacement tyres 4 Fuel 4 Registration renewals 4 Insurances 4 No driver payments 4 Novated lease advantages 5 Income tax and fringe benefits tax (fbt) 5 Fringe benefits tax management 5 Employee contribution method (ecm) 6 GST 6 Vehicle purchase price savings 6 Negotiated parts and labour rates 6 Fuel cards 6 Insurance 7 Vehicle choice 7 Choice of salary sacrifice amount & multiple vehicles 7 Fleet management consultant 7 24/7 Online system 7 Employers with tax concessions 8 Novated lease analysis example 9-10 Getting started 11 Frequently asked questions 12-15

4 About About this guide This guide has been compiled to help both employers and employees better understand Street Fleet s Novated Vehicle Lease packages. As novated leases are based on the circumstances of the individual employee there are implications for each novated lease driver. This guide is not intended to be advice and does not take into account the employee s personal circumstances; and we recommend that anyone considering a novated lease seek independent financial advice. About Street Fleet Street Fleet is an Australian owned and operated vehicle management company that provides organisations with vehicle management solutions. Our business is unique in that we offer a full range of services from financing to purchasing and managing motor vehicles. We are part of the Smith Motor Group of Companies based in South Australia which has a number of vehicle industry associated businesses across Australia and employs around 500 people nationwide. We focus on providing our customers with up to date vehicle information and guidance and the highest levels of customer service possible while working closely with each client to ensure that your requirements are achieved. Look for this symbol throughout the guide for useful tips! We operate autonomously of any motor vehicle dealer, manufacturer or financier, enabling us to impartially negotiate and manage your finance and motor vehicle fleet requirements so as to offer a diverse range of products and services to suit your business and personal needs. 1

5 What is a novated lease? The principle of a novated lease is that an employee can enter into a lease for a vehicle and, as part of the salary package, transfers (novate) their lease obligations to their employer, who makes the lease payments on the employee s behalf. This is done by both parties signing a novated lease agreement. The employer then deducts the lease payments from the employee s pre-tax salary for as long as they remain employed with them. Making lease payments pre-tax can have considerable tax saving advantages, as an individual s taxable income is lowered by the amount of the lease repayments. Types of leases There are two different types of leases which can be novated: finance lease and operating lease. obligation (ie we pay for all the scheduled servicing irrespective of cost alterations over the term). Under a budgeted lease, these maintenance provision amounts are disclosed and regularly reconciled with actual expenditure. If the amount spent is less than budgeted this will be refunded at the lease s completion; if the actuals are higher than budgeted then you will need to pay the shortfall. With a finance lease, the Lessor (Street Fleet) finances the car of your choice over a lease term between 1-5 years. During the lease term, the car is depreciated down to a residual value (RV). The Australian tax office (ATO)has published guidelines for minimum residual value percentages of the vehicle cost price for finance leases, these are shown on the table below: Novated Finance Lease Novated finance lease can either be a fully maintained or a budgeted lease. The difference is that under a fully maintained lease you simply pay the monthly lease payment and Street Fleet carries the maintenance At the end of the lease term, you (the Lessee) can make an offer to purchase the vehicle at the RV value: Lease Term (Years) Minimum RV%

6 W Novated operating lease With an operating lease, the Lessor (Street Fleet) finances the car of your choice over a lease term between 1 and 5 years. Under this type of lease, Street Fleet carries the residual value risk and the RV is not disclosed as it would be under a finance lease. There is no option to buy the vehicle at the lease s completion, however it is generally offered to the marketplace for sale at this time and you may make an offer. This can be a good option if you would like to avoid a residual value payment at the end of the lease and would simply like to hand the vehicle back to Street Fleet. An operating lease car is always fully maintained. Operating lease: you hand the car back a the end Finance lease: you can pay the balloon and own the car Both types of leases can have the inclusions detailed in the next section. 3

7 Lease inclusions Lease inclusions All vehicle running costs can also be included in the lease rental and paid with pre-tax income. You can include: Service and maintenance Replacement tyres Fuel Registration renewals Insurances Service and maintenance based on the manufacturer s published requirements, Street Fleet calculates the service and maintenance requirements to cover the kilometres to be travelled over the lease term. This cost is then included in the lease rental. When a driver books in for a service with a service centre, they will contact Street Fleet for the service authorization and, on completion, the supplier forwards the invoice to Street Fleet for payment. Replacement tyres based on the vehicle type, usage environment and kilometres to be travelled, an estimate is made as to how many replacement tyres will be required over the lease term. When replacement tyres are required, the driver goes to their preferred tyre supplier who calls Street Fleet prior to fitting any tyres for pre-authorisation. At this time wholesale pricing is applied with the invoice being sent to Street Fleet for payment. Fuel based on the vehicle type, usage environment and kilometres to be travelled, an estimate is made regarding the amount of fuel required for the lease term based on the fuel cost of the day. The driver is then issued with a Motorpass fuel card which can be used to purchase all brands of fuel. The monthly fuel invoice is sent to Street Fleet for payment from the lessee s package. This is a budgeted provision ie: actual and budgeted expenses for fuel are regularly reconciled and charged back or refunded where required. Registration renewals the cost of the required registration renewals for the lease period (based on the cost of the day) is included in the lease rental. Registration papers will be registered with Street Fleet s postal address and we will pay the re-registration costs out of your lease s provisions. Insurances Comprehensive insurance can be based on either Street Fleet or driver arranged insurance and is included in the lease rental. The annual renewal process is as per the registration renewal process. We can also include other insurances to manage both vehicle and finance risk, such as: Extended Warranty, GAP Insurance, Payment Protection and Walkaway/Loan termination insurance. No driver payments there should be no reason for the driver to pay for any vehicle related expenses using tax-paid income. If for some unforeseen reason this is the case, these payments can be shifted to pre-tax income by claiming reimbursement from Street Fleet. Including all running costs in your novated lease further reduces your taxable income 4

8 Novated lease advantages The following are some of the reasons why a novated lease can be a cost effective way of financing and running your vehicle: Income Tax and Fringe Benefits Tax (FBT) Under a novated lease, your employer pays your lease payments from your pre-tax income which has the effect of lowering your taxable income and, in turn, your tax. Under a novated lease you are effectively not paying income tax on the amount of your lease payments being paid out of your pre-tax salary. Novated leases attract fringe benefit tax (FBT) with this included in the novated lease salary package. Fringe Benefits Tax management There are two methods of calculating FBT and the statutory formula method is most commonly used with novated leases. This method makes no distinction between business and private use of the vehicle, eliminating the need to keep a logbook to monitor business usage. Using this method, a statutory rate is charged depending on the number of kilometres travelled during the FBT year. The percentage is applied to the vehicles base value (purchase price) and varies depending on vehicle usage. Under the new FBT rates introduced in 2011, a flat rate of 20% will be phased in over the next few years. A benefit arises when there is less FBT payable than income tax that would have been payable were there no salary sacrifice. The rate of FBT is determined on a sliding scale as shown on the below table: The FBT year is 1st April 31st March From May 2011 From April 2012 From April 2013 From April ,000 km ,000 25,000 km ,000 40,000 km More than 40,000 km

9 Novated lease advantages Employee contribution method (ECM) Any after tax payments by the driver towards the running of their novated lease vehicle reduces the FBT by the same amount. To maximise this advantage, an amount equal to the FBT is taken from the driver s salary post-tax and paid to the running cost provisions with this negating the FBT cost. With each novated lease quote, we supply a vehicle salary package analysis which shows the potential benefit of purchasing and running a vehicle via salary packaging a novated lease and novated lease using ECM, and using normal tax-paid income. GST GST is payable on the purchase price of a vehicle as well as most vehicle related expenses. Street Fleet is entitled to claim an input tax credit up to the depreciation limit of the vehicle. Your lease payments are calculated on the vehicle purchase price less the GST which Street Fleet is entitled to claim as an input tax credit. In addition, most employers are entitled to claim input tax credits for the GST on the lease payments and other vehicle related expenses. Vehicle purchase price savings Street Fleet is able to provide a vehicle purchase service. preferential access to limited stock vehicles. Preferential treatment and discounts can also apply to accessories. Vehicle recommendations Street Fleet is nonaligned to any vehicle brand(s) and has considerable vehicle knowledge gained over many years. This allows us to be objective when making recommendations regarding vehicles their drivability, performance, reliability, etc. Negotiated parts and labour rates Street Fleet offers you access to superior discounts across a range of goods and services including vehicle servicing, maintenance, tyres, batteries and windscreens. We don t just pay vehicle related expenses; we control them by preauthorising maintenance and repair work and reducing the risk of over servicing. Fuel cards Street Fleet does not dictate which fuel card you must use and can accomodate any fuel card provider you may currently use. If you do not have an existing provider, our preferred supplier is Motorpass/Motorcharge whose card is accepted throughout Australia. Street Fleet purchases vehicles regularly totaling many hundreds per annum with this volume providing efficiencies of process, pricing and preferential access to vehicle stock. Advantages include: Minimal involvement - if you do not want to do the rounds of the dealers you can advise us of your vehicle preference(s) and we will do the leg work for you. Not Take a look at the novated lease analysis example on page 10 of this guide to see how ECM and GST affects a novated lease only can we save your time and energy, we can save you money. Due to our purchase volume leveraging, we can get higher discounts with lower delivery fees etc. and also 6

10 Novated lease advantages Insurance We have an extensive array of insurance products available to help you mitigate any vehicle or finance risk, including: Full comprehensive, Extended Warranty, Walkaway/Loan termination, Payment Protection, GAP Insurance and Optional Extras. Speak with one of our consultants for more information on how these policies can give you total peace of mind. Fleet management consultant You will have a dedicated fleet consultant who will manage your account from acquisition to disposal. 24/7 online system Our online management system allows drivers to access details on their lease (and employers on their entire fleet) 24 hours a day 7 days per week. This includes full FBT reporting amongst many others. Vehicle choice Subject to any of your employer s policies and credit application, you can choose any make or model of vehicle under a novated lease arrangement. Choice of salary sacrifice amount and multiple vehicles Subject to any of your employer s policies and credit application, you may: select the amount of salary you wish to sacrifice; and salary sacrifice more than one vehicle. When you start your lease you will receive a login and password allowing you to view all transactions and monitor expenses & FBT at any time. 7

11 Employers with tax concessions Public Benevolent Institutions (PBI s) If you work for a Public Benevolent Institution (PBI) there are additional tax benefits: PBIs (that are not hospitals) receive an exemption from paying FBT (subject to a $30,000 capping threshold). Benefits provided to employees are FBT-free where the total grossed up value of certain fringe benefits to an individual employee during the FBT year is $30,000 or less. If the total grossed-up value of the fringe benefits provided to an individual employee is more than $30,000, the PBI employer will be liable for the FBT on the excess amount. Note: The $30,000 capped FBT exemption does not apply to PBIs that are hospitals. Hospital employers have a $17,000 cap on the amount of FBT-free benefits they may provide to their employees. Rebatable employers Employees of a rebatable employer can also package up to $30,000 grossed up however are eligible for a 48% discount rebate on the amount of FBT that would otherwise be payable. Grossing up means increasing the taxable value of a benefit to reflect the gross salary an employee would have to earn at the highest marginal tax rate, including the Medicare levy, to purchase the benefit using after-tax dollars. It is used to determine the amount of FBT applicable to a fringe benefit. The rate used depends on the type of benefit and whether or not it is subject to GST. Here is a quick reference for you: Grossed-Up Taxable Value = Taxable Value of Benefit x Gross-Up Factor Benefit Type Subject to GST Gross-Up factor Type 1 YES Type 2 NO

12 Novated lease analysis example Novated lease analysis example The following page shows an example of a Street Fleet vehicle salary package analysis which accompanies all of our novated leasing quotes. We have entered a fictitious driver named Brian and what this example shows is the effect on the driver s net disposable income across three different types of finance for his vehicle: namely a car loan, novated lease and a novated lease with employee contributions (ECM). In the example, Brian has: An Annual salary of $50,000 Lease repayments of $11, annually contributions to this novated lease which increases his total benefit to $8, over the car loan over the term of the lease. Please refer to the employee contribution section of this guide for further details on ECM. To the right of the analysis is an outline of the lease procedure from application through to ordering. Upon commencement of your lease we will also send a payroll deduction notice through to your payroll officer to assist them with the necessary adjustments. Every quote and analysis is different so it is important to speak with a financial advisor to gain an understanding of the implications which apply to your circumstances. Is in the 20% bracket for FBT Additional assumptions are as outlined on the analysis sheet. The first column shows the cost of the lease if it was a car loan where Brian is making all of the lease repayments from of post tax salary. This column is our reference point for the other two examples. The second column shows the effect on Brian s net salary of using a novated lease; where he makes the lease repayments from of pre-tax salary giving him a $5, benefit over the car loan for the life of the lease. Contact us today for your own novated lease quote & analysis The third column shows the effect of Brian making post tax 9

13 Vehicle Salary Package Analysis for: Employee: Brian Smith Where to from here? Employer: ABC Pty Ltd Lease Type: Novated - Fully maintained When you are happy to proceed: Vehicle: Hyundai Elantra Sedan Auto Date: 5/07/2012 #1 Contact your Street Fleet consultant for a credit application Description Quote Number: #2 Send back your completed application with supporting documentation; we will respond within 24 hours Employer FBT Status: FBT Method: ECM Payroll Cycle: FBT Rate: 20% #3 Upon approval: send the quote form back signed by both yourself and an authorised representative of your employer Non-Novated Novated Lease Novated Lease - ECM Post-Tax Payments Pre-Tax Payments Pre & Post Tax Payments #4 We will order your vehicle on your behalf Gross Annual Salary $ 50, $ 50, $ 50, #5 Prior to delivery, Lease documentation is to be signed by both yourself Less: and an authorised representative of your employer Lease & Operating Costs $ - $ 11, $ 7, (packaged Pre-Tax) Fringe Benefits Tax (FBT) $ - $ 4, $ - vehicle will be delivered GST on Employee Contribution $ - $ - $ Luxury Car Charge $ - $ - - Input Tax Credits (ITC's) $ - $ 1, $ 1, Taxable Salary $ 50, $ 35, $ 43, of lease commencement #6 Once the documents are signed and insurance(s) are in place your $ #7 Your payroll officer will be given details of your required salary deductions #8 Fuel card & roadside assist details (if included) will be sent within 7 days Tax (inc. Medicare & Flood Levy) $ 8, $ 3, $ 6, Post-Tax Salary $ 41, $ 31, $ 37, Employee Contribution (vehicle) $ - $ - 4, Car Finance & Operating Costs $ 11, $ - - ** paid post tax $ ** $ How do I track my lease? Net Disposable Salary $ 29, $ 31, $ 32, You will be ed a login and password for Street Fleet online. Estimated Annual Benefit $ - $ 1, $ 2, This will let you: Estimated Term Benefit $ - $ 5, $ 8, Monitor FBT Notes: The above analysis makes the following assumptions: 1. Your Employer is entitled to a full tax credit for all payments under a novated lease Track expenses/budgets Update contact details 2. The vehicle is available 365 days of the year for the employee's use Monitor other fleet events (accidents, fuel cards etc) 3. The employee is an Australian Tax Resident and has private health insurance 4. When financing through a bank that the employer can access the same interest rate offered by Street Fleet and that they are able to finance with a balloon amount 5. That the employee can operate the vehicle for the same running costs as Street Fleet This information is provided for illustrative purposes only and does not take into account your personal financial If you have any questions throughout this process please contact your situation, investment objectives or specific needs. It does not constitute investment advice, an offer, or a quote. We recommend Street Fleet consultant on that you seek advice from either a financial planner or accountant who is able to assist you in taking your personal financial situation, investment objectives and specific needs into consideration, before taking out any lease. 10

14 Getting started Finding a car Street Fleet also offers to locate any new or demo vehicle for you as part of the novated lease package through our extensive australia wide dealer network. Visit the novated lease section of to use our novated lease calculator to show you what you could save. Advantages of doing this include: Easy to use, Street Fleet does all of the negotiating; access to any make or model of vehicle our insistence on the freshest stock available; accuracy of paperwork If you have already found a vehicle please forward details on to your Street Fleet consultant. Please contact us to request a quote and to give us details of the dealer on either or info@streetfleet.com.au Please do not sign any contracts or pay any deposits to dealers on vehicles before talking to Street Fleet as it may cause difficulties in achieving a better price on the vehicle. 11

15 FAQ Can I finance a used vehicle? You can lease a used vehicle as long as it is not more than 7 years old or 200,000km at lease end. The vehicle must be purchased from a licensed motor vehicle dealer (we are unable to purchase from private individuals). We are also able to offer Street Fleet ex lease vehicles. What happens if my vehicle is no longer under warranty? If you are looking at a used vehicle which is outside the manufacturer s warranty period or kms then we can include an extended warranty product in your lease to cover this asset. This can be opted out at any time before the lease starts and a product disclosure statement (PDS) is made available with the initial lease quotation or by visiting It is important that you consider the costs of unexpected warranty claims if you do choose to opt out of this product as they will not be taken into account when structuring the lease. Is a novated lease right for me? With each quote, your fleet consultant will provide you with an analysis showing how the lease may affect your annual and monthly salary. Each financial position is different and you should consult either a financial planner or tax professional before entering into a novated lease. What are the credit approval requirements? Once you are happy with your novated lease quote, we will also a privacy statement and credit application that asks for some basic information relating to your individual financial status. It is important that you read and understand these forms and contact us if you have any questions. Once you complete and submit these forms along with supporting documentation, you should receive confirmation of your credit approval within 24 hours. The credit approval process is a standard lending application that looks at your personal circumstances and credit history. Will I need approval from my HR? Your HR or payroll department will be notified when you accept your novated lease quote. we will ask them to confirm your employment at the application stage. Your employer must agree to commence leasing the vehicle from Street Fleet and to make the required monthly salary deductions. How long will the whole process take? We recommend that you start the process as early as possible. Uncontrollable delays can occur particularly for popular or new models. However if: the vehicle is in stock in your state and you do not want it overly customised or accessorised; and your credit application proceeds smoothly, the process takes approximately five business days. Who is eligible for a novated lease? Street Fleet will extend credit only to permanent full time employees with clear credit history. Please note that employees must have completed any probationary employment period. Our standard terms and conditions apply. How will you protect my privacy? We will ask you to sign a privacy statement which outlines how we use your personal information. This includes disclosing information to a credit reporting agency, your employer and the dealer to the extent each of them needs to know the information or to undertake a search of your credit history. We may also use your details to tell you about our products and services in the future. 12

16 FAQ What if I take delivery of my vehicle during the FBT year? FBT rates have standardised to 20% it is no longer an issue to take delivery during the FBT year. Your FBT is simply calculated based on the number of days used in the year. What is the Luxury Car Tax Limit and how would it affect my lease? Luxury car tax (LCT) is a 33% tax on any luxury vehicle as determined by an ATO nominated value. Currently 2013/2014 the LCT limit is $60,316 so any vehicle with a value above this amount will be taxed at 33%. For green vehicles this limit has been increased to $75,375. Taking out a novated lease on a vehicle above this limit can have an additional impact on your salary (over a non luxury vehicle) as the tax treatment changes for vehicles above this limit. We strongly recommend you speak with a financial advisor or tax professional if you are looking at a novated lease on a luxury vehicle. Is comprehensive insurance included? All leased vehicles must be comprehensively insured. There are two options for including comprehensive insurance in your cost to package: Street Fleet can arrange insurance through a preferred supplier. The preferred supplier arrangements provide comprehensive motor vehicle insurance at competitive rates with features designed with novated lease in mind. Let us know if you would like more information about the product features. What is accident management? Street Fleet s novated lease products include an accident management service. Simply call our office and we can assist you to deal with the accident, make an insurance claim, have the vehicle repaired, etc. What happens if I write my lease vehicle off? If your vehicle is written off then we will give you a payout on your lease, upon payment of which the lease will be terminated. If your insurance payout does not match the finance payout you will have to make the shortfall/gap payment to us to finalise the lease. Gap insurance may also be included on your initial quotation to cover you for this event up to certain limits. This can be opted out at any time before the lease starts and a product disclosure statement (PDS) is made available with the initial lease quotation or by visiting Depending on your insurer s policy terms and conditions, and under certain circumstances, we may be able to accept old for new replacement on the existing lease. Can tolls and parking infringements be included in my lease? No. The ATO guidelines state that tolls and parking infringements cannot be included in a novated lease Who can drive my novated lease vehicle? It is completely up to you; however there may be restrictions from your insurer or employer on who can drive the vehicle. Source your own insurance and provide the annual premium and policy details to Street Fleet so we can organise a reimbursement and include this amount in your cost to package. 13

17 FAQ How do I purchase fuel and when will I get my fuel card? If you have nominated to have Street Fleet organise your fuel card through Motorpass/Motorcharge, this will arrive in approximately 7 days. If you need to fill up during this period we will reimburse you from the lease provisions if fuel has been included. What do I do if my vehicle is due for a service? Just book the vehicle into your local MTA approved service centre. When dropping the car off, let them know that Street Fleet manages the vehicle and they will contact us for authorisation. Our decals will also be on the service books to remind the dealer. Once the service is complete simply collect your vehicle. All invoices will be sent to our office for payment. If there are any issues with the vehicle (such as required repairs etc) we will contact you to discuss. How do I track what I have spent against the budgets included in my package? Just visit where you can log on to our secure online system to view your expenditure 24 hours a day, 7 days per week. How can I track my actual kilometre usage against my lease kilometre limits? There are three ways that we can collect km readings on your lease vehicles: 1. When you give your kms reading at petrol stations 2. When your vehicle is serviced 3. If you manually enter your reading in our online system. At any stage you can log into the system to track your actual kilometres against your kilometre limit. This can also generate a report that advises how your kilometres are tracking for fringe benefits tax. What if I need reimbursement? If you ever need to pay for fuel, maintenance or other related expenses with your own money, Street Fleet can reimburse you from your running cost budget ensuring that all costs are paid from your pre-tax salary. Simply contact us for a reimbursement form and Street Fleet will reimburse the money back into your nominated bank account via EFT. Vehicle registration Street Fleet will arrange for the vehicle to be registered with our mailing address. The cost for registration is included in your lease and will be paid by Street Fleet. We will send you the registration papers each year and you are responsible for ensuring the new label is attached to the vehicle (if required to do so by state law). If the vehicle becomes unregistered, your authority to use the vehicle is withdrawn and you must make sure that nobody drives the vehicle. What if I spend less money than my employer deducts? These amounts are returned to you via your payroll at the end of the lease term. What if I spend more money than my employer deducts? These amounts are invoiced to your employer and deducted via your pre-tax salary bi-annually. 14

18 FAQ When does my cost to package get reconciled? In the event of any of the following: if you are tracking well ahead or behind on your budget, at the end of the lease term; or if your employment is terminated. What happens if I leave my employer during my lease term? If you leave your employer, you must notify Street Fleet in writing as soon as possible. The novation agreement with your employer will be terminated and you become the lessee of the vehicle. This means that you will become responsible for making all lease payments. You may also contact us on to discuss alternative arrangements such as transferring to a new employer or paying the lease out early. Street Fleet will provide your employer with a package reconciliation that includes FBT to assist them in preparing your final payment. As some costs may not be known on the date the novation is terminated, it may take up to 5 days to complete the reconciliation to calculate your final payment or refund. What happens at the end of my lease? Three months prior to the end of the lease term, we will contact you to remind you that the end of your lease term is approaching and outline the alternatives that are available to you. What happens if I involuntarily leave employment or cannot work? If you involuntarily leave your employment or cannot work due to certain circumstances, you will still be required to make the lease repayments. Walkaway or Loan Termination Protection insurance may be included on your lease to allow you to hand the vehicle back should one of the designated life events occur (up to certain limits). This can be opted out at any time before the lease starts and a product disclosure statement (PDS) is made available with the initial lease quotation or by visiting How do I contact Street Fleet for more information? P: W: E: info@streetfleet.com.au Something we haven t covered in the FAQ? Contact us for the answer. 15

19

20 call streetfleet.com.au