Transcription

1 Novated lease guide

2 Contents 1.0 Introduction 1.0 Introduction What is novated leasing? How does novated leasing work? Benefits of a novated lease Novated lease vehicle packaging comparison Understanding the costs Novated lease finance costs Vehicle running costs Understanding the tax benefits Fringe Benefits Tax (FBT) Employee Contribution Method (ECM) Days not available Example calculations Helping you keep track of your novated lease Getting started 19 Introducing novated leasing with Toyota Fleet Management (TFM) At TFM, we specialise in novated leasing. With over 30 years experience in financial services, we work with you closely as a trusted partner, offering the highest quality service and products to suit your needs, as well as taking care of the details from start to finish. A TFM novated lease can provide you with significant cost savings, tax benefits and convenient ways to keep track of your vehicle expenses. For all the benefits of a TFM novated lease, please review this guide and contact our TFM team any time on This guide will be updated from time to time, so please contact us regularly to ensure you have the latest information. Novated lease team novated@toyota.com.au 6.0 Additional lease information Lease terms Eligible vehicles Residual values Luxury Car Tax (LCT) Luxury Vehicle Income Tax (LVIT) adjustment Lease reconciliation Lease end Employment cessation Early termination Common novated lease terms 23 1

3 1.1 What is novated leasing? A novated lease may mean you can drive the vehicle of your choice, without compromising your lifestyle, and you could save thousands on the purchase price and running costs of a new or used car, or even the car you currently drive. A novated lease also allows you to enjoy the convenience of cashless motoring and gives you access to TFM s discount programs, so you ll receive great deals on finance, fuel, maintenance and repairs. Novated leasing simply means that your employer pays for your vehicle lease out of your salary package through a combination of pre-tax and post-tax salary deductions. The many potential benefits for you include: Novated leasing is recognised by the Australian Tax Office (ATO) as a tax-effective way to salary package. Novated leasing allows you to choose the vehicle you want. You can even sacrifice additional salary to package more than one vehicle. Novated leasing enables you to take advantage of GST credits (input tax credits) on vehicle purchase and vehicle running costs, meaning you can save even more. A novated lease may allow you access to corporate fleet discount pricing when you buy a car, saving you even more money. At the end of your novated lease, unlike conventional company vehicle arrangements, you may be able to take advantage of any surplus between the market value of the vehicle and its residual value (plus GST).* * Conditions apply. 1.2 How does novated leasing work? Novated leasing is a form of salary sacrifice or salary packaging. It is a financial arrangement between the Financier (TFM), you (lessee) and your Employer. Novated refers to the transfer of the lease to your employer, who takes responsibility for the lease on your behalf during the term of your employment. You generally have responsibility for the vehicle itself. All three parties agree to individual obligations through a TFM novated lease agreement. You No cash, no worries all fuel and other vehicle expenses can be covered in the monthly lease payment. We take care of everything, including registration renewal, scheduled servicing, warranty repairs, tyre replacement and fuel payments. Our buying power means that you can access discounts normally only available to corporate fleets on all products and services. For example, by using a TFM Fuel Card you ll get a discount every time you fill up your tank. Vehicle lease Toyota Fleet Management Vehicle lease/ Operating costs Novation Your Employer 2 3

4 1.3 Benefits of a novated lease With a novated lease from TFM, everyone wins. From tax and cost savings through to flexibility and convenience, both employers and employees can benefit. Tax savings: A vehicle financed through a novated lease is considered a company vehicle for tax purposes. This means you can take advantage of these extra benefits: GST credits (input tax credit), on the initial vehicle purchase (capped in accordance with the Luxury Car Limit). GST credits on vehicle running costs including maintenance, tyres and fuel. Fringe Benefits Tax (FBT) can provide a lower form of taxation when you package all or a significant amount of the vehicle lease and running costs through your pre-tax (gross) salary. Save on the purchase price and running costs: You may be able to benefit from corporate fleet discount programs, which can significantly reduce the recommended retail price of a car. Convenient and cashless motoring: Our TFM Fuel Card is a convenient way to pay for fuel and also provides discounts through a number of major fuel providers. All your vehicle servicing and repairs can be paid for through our Repair Authorisation Service. No more keeping receipts or completing logbooks. Novated leasing is a handy budgeting tool, as all vehicle running costs can be packaged into a single monthly payment, automatically deducted from your salary. Control and flexibility: You choose the vehicle you want and where and how you want to drive it. Lease any make and model, including new, used or demonstrator vehicles. If you choose to leave your current employer, the vehicle remains with you and you may continue the lease yourself or novate the lease to your new employer. Vehicle running costs can be managed by TFM, so you enjoy access to our discount servicing and maintenance costs. 4 5

5 1.4 Novated lease vehicle packaging comparison Compare the potential savings when you finance your vehicle through a TFM novated lease. Assumptions made in the example demonstrated in the table on the left hand page include: Analysis assumes that employer is eligible for an input tax credit and will pass the benefit to the employee s novated lease. Toyota Kluger KX-R AWD 3.5L Automatic 7-Seat Wagon RRP $45,990 Total vehicle on-road cost Factors Private purchase With novated lease $47, $42, Amount financed $47, $39, Lease term 48 months 48 months Residual value (inc GST) $15, $15, Km per annum 20,000km 20,000km Lease costs (monthly) Finance $ $ Maintenance $58.89 $53.54 Tyres $26.50 $24.09 Fuel $ $ Comprehensive insurance $83.33 $83.33 Registration $78.99 $78.99 Management fee $0.00 $25.00 Fleet discounts reduce the vehicle purchase price. Novated lease finance is further reduced by GST credits. Enjoy the benefit of GST credits for vehicle running costs. Quotes prepared as at 01 November Whilst every effort has been made to provide an accurate representation at time of preparation, costs provided are indicative at time of quoting and subject to change. Vehicle discounts are based on Toyota Fleet discount scheme and subject to eligibility. Finance is a novated lease with a residual value calculated monthly in advance and in accordance with TFM policy and ATO guidelines. All costs are based on the vehicle being leased in the state of NSW. Running costs are budgeted and dependent on actual cost with a reconciliation adjustment during and/or at end of lease. All lease costs quoted are per month unless otherwise stated. Comprehensive insurance cost is an estimate; actual cost depends on the individual application. Total monthly cost $1, $1, Savings per month $

6 2.0 Understanding the costs 2.1 Novated lease finance costs The total amount financed through your novated lease is calculated by taking into account the cost of the vehicle and its accessories, the lease term, current interest rates and market value of the vehicle at lease end. Vehicle purchases attract GST. However, TFM can claim a GST credit (input tax credit) when we finance a vehicle under a novated lease. You benefit because this effectively reduces the vehicle price. We then pass the benefit of any GST credit to you and reduce the amount being financed (capped by the Luxury Car Limit). The total amount financed is calculated over an agreed term and broken down into monthly payments. At a glance, your TFM novated lease covers: Vehicle price and accessories. Dealer delivery charges. Initial registration and Compulsory Third Party (CTP) insurance. Purchase stamp duty. Luxury Car Tax (where applicable). Novated lease establishment fee. Personal Property Security (PPS) registration fee. 2.2 Vehicle running costs All the running costs for your vehicle can be covered in your monthly lease payments. These may include fuel, servicing and maintenance, tyre replacements, registration and insurance renewals. Your vehicle running costs are based on your lease term and the nominated number of kilometres you are likely to travel. Fuel Card Buying fuel is easy with our TFM Fuel Card. You ll enjoy significant discounts on the pump price (via a rebate) at all BP outlets, as well as over 80% of service stations operating through the national Motorpass network. The TFM Fuel Card can also be used in conjunction with supermarket docket fuel discount offers for even greater savings. Service, maintenance and tyres TFM s Repair Authorisation Service uses an extensive network of maintenance facilities to make sure you receive great service and allows us to: Negotiate substantial discounts on labour rates and spare parts. Enforce and extend warranty claims. Accurately forecast service and maintenance costs, which means lower monthly charges. Offer a broad repair and service network to minimise any inconvenience to you when your vehicle needs to be serviced. Ensure that like-for-like, manufacturer-specified parts are used. Our approved repairers also prevent over-servicing while maintaining your vehicle to the highest standard, keeping you on the road and increasing the market value of your vehicle. 8 9

7 Registration and CTP insurance A novated lease covers the full registration and CTP insurance amounts in your monthly payment. In states where CTP can be purchased separately, our buying power achieves very competitive rates. Comprehensive insurance Whether you choose Toyota Insurance or your own insurer, we include budgets and can arrange payment on your behalf. Roadside assistance If you want the reassurance of roadside assistance or motor club membership, you can include these additional costs in your monthly payments. Reimbursement All personal vehicle-related costs like re-registration can be reimbursed simply by completing a personal expense form located at novatedonline.com.au Renewal management Another great advantage of a TFM novated lease is that we remind you of any registration, CTP and comprehensive insurance renewals well in advance of due dates and also arrange renewal. Please note that it is your responsibility to ensure that the vehicle is registered at all times. Novated lease protection TFM offers payment and gap insurance through Toyota Insurance* which will continue to pay your lease for up to six months and provides a vehicle hand-back option if you don t gain employment within that time. TFM novated lease protection gives you extra peace of mind. * Terms and conditions apply. Before making a decision about any of the insurance products, please refer to the current Product Disclosure Statement (PDS) for the relevant product available, via the Toyota Insurance website at toyotainsurance.com.au or by calling Toyota Insurance is a division of Aioi Nissay Dowa Insurance Co., Ltd. ABN AFSL Number (Andia). Fees and charges These include an establishment fee and ongoing monthly management fees. Variation fees and reimbursement fees may apply if there are excess requests for reimbursement or if you want to change your agreement. All TFM fees will be fully explained in your employer s vehicle policy and also in your novated lease terms and conditions. Please note: Tolls and parking cannot be incorporated into your novated lease payment. Deposits or trade-ins cannot be used to reduce the amount to be financed. With novated leasing, the full amount of the vehicle purchase price must be financed. Your employer may stipulate other exclusions and these should be noted in the employer s policy

8 3.0 Understanding the tax benefits 3.1 Fringe Benefits Tax (FBT) Although application of the FBT regime can lower the amount of tax you pay, you must be careful not to incur extra costs. Your FBT is based on the number of kilometres you are likely to travel during the FBT year, from 01 April to 31 March, not on the anniversary of your lease signing or the Australian financial year. By novating a vehicle, your lease costs are salary packaged through a combination of pre-tax and post-tax deductions, meaning you have less taxable income. However, because you benefit from this arrangement, it is deemed a fringe benefit under taxation law. As a result, two types of tax apply: Income Tax for your cash salary and FBT for your vehicle. You still come out on top if you make sure you meet your kilometre target, which reduces the FBT to be paid. Projected FBT costs are calculated into your novated lease package costs and adjusted accordingly at FBT year end. Your kilometre target for the FBT year covers your vehicle for both business and personal use. Your TFM Fuel Card captures odometer readings each time you fill up, which means we can help you track and calculate your FBT obligations in accordance with ATO guidelines. An example of the FBT ATO Statutory Rates is demonstrated on the right hand page. Fringe Benefits Tax Transitional Arrangements The Federal Government Budget on 10 May 2011 introduced transitional rules towards the calculation of car FBT using a standard statutory flat rate of 20%. Annual kilometres travelled Statutory % Until 10 May to 14,999km 26% 15,000 to 24,999km 20% 25,000 to 40,000km 11% 40,001km plus 7% Transitional FBT From 01 April March to 24,999km 20% 25,000 to 40,000km 17% 40,001km plus 13% From 01 April March to 40,000km 20% 40,001km plus 17% From 01 April km plus 20% Novated lease commitments commenced prior to 7.30pm on 10 May 2011 will be grandfathered and will not be subject to transitional FBT unless the contract is modified. Novated lease commitments commenced after 7.30pm on 10 May 2011 will be subject to Transitional FBT. Vehicles travelling 25,000km or more will be subject to increasing Statutory % to 20% on 01 April

9 3.2 Employee Contribution Method (ECM) The most popular way to package your vehicle is Employee Contribution Method (ECM), which includes both pre-tax and post-tax deductions from your salary. ECM has greater tax benefits than a purely pre-tax sacrifice approach if your salary is below $180,000. By contributing from your post tax salary you substitute the FBT rate of 46.5% with your own lower income tax rate. As an added benefit, we calculate the correct portion of pre-tax and post-tax dollars for you so that the right amount of post-tax dollars is contributed to eliminate FBT, while maximising your tax savings. The good news is there are no FBT penalties if you exceed your nominated kilometre target under the ECM method. However, if you do not achieve your kilometre target, you will be liable to pay a higher FBT amount. If you earn $180,000 or more per year, Statutory Method without ECM and Statutory Method with ECM salary packaging options deliver the same benefits. FBT calculation using the ECM FBT cost base FBT taxable value x Statutory rate % / x Days in FBT year (365) FBT gross-up x FBT tax rate 3.3 Days not available x = Days available (days in FBT year less days unavailable) FBT liability - Employee post-tax contributions = FBT taxable value Sometimes your vehicle may not be available for travel. In these instances you are entitled to a reduction in FBT. Days not available is applicable when: Your vehicle is off the road for accident or mechanical repairs for one whole business day or more. You leave your vehicle on company premises and surrender the keys to an authorised person for one whole business day or more. It s important to note that although your vehicle may not be available, Australian taxation laws stipulate that your FBT kilometre targets remain unchanged and must be met

10 3.4 Example calculations FBT calculation using the Statutory Method Simple annual FBT liability calculation (A) FBT cost base^ $40, (B) Distance travelled 20,000km (C) FBT statutory percentage 20% (D) FBT taxable value (A x C) $8, ^ Where the FBT cost base is the total GST inclusive On-Road Cost of the vehicle excluding Registration CTP and Purchase Stamp Duty. FBT taxable value (D) x FBT gross-up (E) x FBT tax rate (F) = FBT Liability Comparison calculation for non-packaged, statutory packaged and ECM packaged Without salary packaging Salary packaged statutory without ECM Salary packaged statutory with ECM Salary package $80,000 Salary package $80,000 Salary package $80,000 Vehicle package $14,933 Vehicle package $6,932 FBT $7,682 Pre-tax ECM GST $727 Taxable salary $80,000 $57,385 $72,341 Less tax payable $18,747 Less tax payable $11,058 Less tax payable $16,143 Less vehicle cost $17,336 Less vehicle cost $0 Post-tax vehicle $8,001 Total after-tax salary $43,917 $46,327 $48,197 Calculations based on tax rates effective 01 July (E) Gross-up (F) FBT tax rate 46.50% $8, (D) x (E) x 46.50% (F) = FBT Liability $7, Please note: The FBT calculation may change due to other considerations such as days not available and employee contributions (explained on the previous page), which are calculated from information provided in an FBT declaration form at the end of each FBT year

11 4.0 Helping you keep track of your novated lease TFM makes sure you stay in touch with the latest news about your novated lease through quarterly reports, via our website and regular updates. Importantly, we ll help you with your FBT by letting you know your target odometer reading for 31 March each year and provide a kilometre analysis to keep you on target. Account information online You can easily track the activity and details of your novated lease account any time via our online portal, novatedonline.com.au You can see the number of kilometres already travelled and how many you still need to satisfy your FBT requirements. It also includes your insurance and personal details and itemised expenditure related to your account. Legal documentation Your novated lease agreement clearly shows details of your legal obligations to TFM, your employer and yourself in regard to your novated lease. 5.0 Getting started It s easy. All you need to do is call our novated leasing Fleet Management team. Our consultants will guide you through the process and answer any questions you might have. Assuming that your car is ready for you to pick up from the dealer, a consultant can have you up and running within one to two weeks. Just follow these eight easy steps: 1. Call us on to request a quote (select option 1). 2. Choose the best option for you and submit a credit application. 3. We will assess your application and confirm credit approval. 4. You ll receive the lease documentation to complete. 5. Simply sign the lease documents with your employer and return them to TFM. 6. We will order your vehicle and confirm a delivery date. 7. We will arrange delivery of your vehicle. 8. We will notify your employer, arrange payroll deductions and mail your TFM Driver s Kit. FBT declaration At the end of each FBT year (31 March) you must sign an FBT declaration, detailing the number of kilometres you travelled during the FBT year. This form allows the ATO and TFM to determine your FBT obligations

12 6.0 Additional lease information A TFM novated lease gives you a choice of terms, vehicles and ways to manage your lease, according to your needs. 6.1 Lease terms TFM offers a choice of lease terms ranging from 12 to 60 months. 6.2 Eligible vehicles You can choose a vehicle of any make or model to suit your personal and business lifestyle, whether it s a new or used passenger sedan or hatch, SUV or 4WD. Under ATO law, boats, caravans, trucks and motorbikes cannot be novated. Use of the statutory method requires that the vehicle be a car for FBT purposes, being a vehicle which is designed to carry less than one tonne and fewer than nine passengers. A vehicle that is not a car may be subject to additional FBT liabilities. 6.3 Residual values Determining the residual value of your vehicle is simple it is based on the amount being financed as a percentage of the lease term (see table opposite). Please note: If you decide to offer to purchase your vehicle, any payment will attract GST. This applies at lease end or upon early termination. ATO residual value table Lease term (months) Residual value % % % % % % 6.4 Luxury Car Tax (LCT) Vehicles with a GST-inclusive value above the applicable LCT limit will be subject to LCT. The current rate of LCT is 33% and is payable on the GST-exclusive value of the vehicle above the applicable limit. 6.5 Luxury Vehicle Income Tax (LVIT) adjustment Special tax accounting rules apply if you lease luxury vehicles valued above the LVIT limit ($57,466 at date of publication). These rules re-characterise the lease as a sale and loan transaction. Your employer needs to account for your luxury vehicle novated lease as a loan transaction which can result in increased costs for both of you. Rather than claiming the lease payments (finance rent element) as a deductible expense, your employer claims interest and depreciation as a taxation deduction. The depreciation charge is capped at the LVIT limit of $57,466, which is where the increased costs lie. The good news is, we manage the intricacies of LVIT adjustments for you and incorporate additional costs into your lease as itemised payments

13 6.6 Lease reconciliation We reconcile each novated lease at the end of its term, when you cease employment with your employer or upon early termination. This may take up to 30 days. Both you and your employer will be formally advised in writing of the amount outstanding or owed by TFM. 6.7 Lease end Prior to lease expiry you may be offered the opportunity to purchase your vehicle, extend the contract or return the vehicle to us. 6.8 Employment cessation If you leave your employer, the novated lease and vehicle payment obligations transfer immediately from your employer to you. All of our services, including TFM Fuel Card and vehicle running costs, will cease. Unless you decide to re-novate your vehicle with a new employer, you will be required to continue lease payments from your after-tax income. Alternatively, you may pay out the lease or refinance your vehicle with a consumer loan. 6.9 Early termination If you wish to end your novated lease prior to the completion of the agreed lease term, please contact us on to receive a lease payout quote. A payout figure will be calculated and the reconciliation process will begin. 7.0 Common novated lease terms Australian Taxation Office (ATO) The ATO is the government s principal revenue collection agency. The role of the ATO is to manage tax, excise and superannuation systems that fund services for Australians. Cashless motoring As a TFM novated lease customer you do not need to use cash for the day-to-day running of your vehicle. You pay for your fuel on our TFM Fuel Card and all vehicle registrations and insurance payments can be made through TFM. Employee Contribution Method (ECM) This form of salary packaging includes both pre-tax and post-tax deductions from your salary and increases your tax benefits. The FBT rate of 46.5% is effectively substituted by your income tax rate for post-tax contributions. Fringe Benefits Tax (FBT) FBT is applied to the portion of your salary that is not paid in cash. In the case of a novated lease, your vehicle attracts FBT charges. The FBT paid can be reduced by ensuring you meet the projected target for kilometres travelled within the FBT year (01 April 31 March)

14 Goods and Services Tax (GST) The standard GST rate of 10% is applied to vehicle purchases and running costs. As a novated lease customer, you benefit from GST credits (input tax credits) on your vehicle s purchase price, finance, maintenance, tyres, running costs and fuel. Lease This is a legally binding agreement between two or more parties, where one party supplies a product or service, and another party pays to use the product or service for a period of time. Luxury Car Tax (LCT) LCT is applied to vehicles with values exceeding the Luxury Car Limit, GST-inclusive value of $59,133 (01 July 2012) and $75,375 for fuel efficient vehicles (7.0L/100km or less). About this guide This guide has been developed by TFM to provide you with information about the selection, establishment and ongoing management of a novated lease. Financial advice In Australia, there are certain taxation benefits to acquiring a vehicle through a novated lease. It is recommended that before making any decision, parties should seek appropriate advice from their taxation consultant or financial adviser regarding the benefits of this financing option, including its treatment under income tax, FBT, GST law or relevant state and territory laws where applicable. Novate To transfer the contractual rights and obligations of a legal agreement to another party i.e. the employee transfers the rights and obligations of the vehicle lease to their employer. Residual value The value of the vehicle at the end of the contracted term, which was agreed at the beginning of the lease. This value is used to calculate the monthly lease payments. Statutory Method A car FBT calculation based on a legislatively prescribed schedule. The calculation may include the use of ECM to provide the best tax benefit. How to contact TFM Phone: Fax: novated@toyota.com.au 24 25

15 Move forward with us toyotafleetmanagement.com.au Toyota Fleet Management is a division of Toyota Finance Australia Limited ABN Australian Credit Licence A member of the Toyota Group of Companies. TFM002 (1/13)