SALARY PACKAGING MOTOR VEHICLES GUIDE TO EMPLOYEES 1. Introduction Categories of Arrangements. 2. Benefits of Vehicle Leasing. 3. Lease Contract Conditions. 4. Understanding the Commitment. 5. Safety Nets. Employee departs from employment. Employee does not depart but wishes to return vehicle. 6. Lease end. Employee purchase. Vehicle returned to LeasePlan. 7. Infringement Notices. 8. LeasePlan vehicle reporting. 9. Contacts. 10. Procedures. 10.1 Requesting quotations. 10.2 LeasePlan quotation. 10.3 Ordering a Vehicle. 10.4 Vehicle delivery. 10.5 Fuel cards. 10.6 Registration. 10.7 LeasePlan Pocket Guide 10.8 Vehicle Servicing 11. Fringe Benefits Tax (FBT) Year. 12. Fringe Benefits Tax. 13. Reportable Fringe Benefit. 14. Frequently Asked Questions. 16. University Provided Vehicles Arrangements for Senior Managers. Important Note The decision to participate in the motor vehicle leasing arrangement is entirely the decision of the employee. It is important to understand the commitment. Your lease contract will commit you to the arrangement for up to 3 years. Safety nets, as discussed in this document, are in place. The University strongly urges you to seek independent financial advice before committing. 1
1. Introduction Salary packaging of a motor vehicle is available under the following circumstances at the University: 1. Where a staff member wishes to salary sacrifice a vehicle for his/her own use, out of the remuneration which is received from the University; (lease type : Contract 59) 2. Where a senior manager receives a vehicle allowance as part of his/her remuneration package, and wishes to salary sacrifice a vehicle. The major part of this document refers to the first case. Section 15, at the end covers the relatively few cases which fall into the second category. The leasing arrangement provides an employee of the University with an alternative approach to new motor vehicle ownership. Motor vehicles will be supplied on a fully maintained basis including fuel, registration, maintenance, insurance and Fringe Benefits Tax (FBT). Vehicles will be provided on a 100% private use basis for options 1 and 3 above. A deduction is made from the employee s gross salary so they are able to salary sacrifice the lease payments and the running costs of the vehicle. The University in partnership with LeasePlan Australia will provide a fully maintained new motor vehicle to UQ employees. LeasePlan is the leader in developing leasing and fleet management services specifically for remuneration packaging purposes. The product combines the benefits of both an operating lease and fleet management into a single package. The package is provided at cost with the employee receiving a benefit from any surplus on sale and operating costs. For a full list of approved vehicles, you may create a user ID for the LeasePlan Online Portal. https://portal.leaseplan.com.au/irj/portal LeasePlan calculates the monthly operating costs, and budgets this pre-calculation as the maximum that will have to be paid for the total kilometres estimated to be travelled. The budgeted estimates may vary based on the actual costs incurred in operating the vehicle. Furthermore, the employee may receive up to 100% of the surplus on sale of the vehicle (above the residual value) and operating costs via an individual settlement process. Loss on sale of the vehicle (if applicable) will be passed on if a deficit in other provisions account, and/or any other budgets such as fuel, maintenance etc exists. Excess kilometres, unfair wear and tear, and excess usage charges may apply. If the budgets retain a surplus at the end of the leasing period, any loss on sale is absorbed against the operating budgets. 2
2. Benefits of Vehicle Leasing Convenience associated with a new motor vehicle. A flexible financing and fleet management option to employees who wish to achieve equity in their vehicle via a tax effective lease arrangement. Potential for lump sum benefits on sale (subject to marginal tax rate charges) LeasePlan is able to purchase vehicles at fleet prices resulting in lower leasing costs to UQ employees. The vehicle is fully maintained including fuel, registration, maintenance, repairs and insurance. LeasePlan are able to offer substantial savings on operating costs up to 30%. Because of LeasePlan s purchasing power, the residual values at lease end allow the employee to purchase the vehicle at a realistic price. Fuel cards for both Caltex and Shell outlets will be provided. Safety nets have been built in should the employee leave the University or wish to return the vehicle. LeasePlan provides comprehensive insurance at a competitive rate. The excess for each individual accident is $500.00 regardless of the age of the driver (providing the person is a valid licence holder). 3. Lease contract conditions 3.1. Maximum Term LeasePlan offer a maximum lease term of 3 years for the original lease. 3.2. Vehicle Limitations Vehicles to be provided are restricted to a limited range. These attract the most generous fleet discounts. The full range of approved vehicles can be accessed through the LeasePlan Online Portal. https://portal.leaseplan.com.au/irj/portal 3
3.3. Operating Costs. Lease contracts will be fully maintained with fuel, maintenance, registration, repairs and insurance. The costs associated with the contract will be budgeted for the life of the contract and any under or over provision will be reconciled at the end of the lease. The cost of leasing will be processed through the employee s salary under the pre-tax arrangement. All costs (budgeted) associated with vehicle leasing will be set out in the lease contract. At any point of time, the employee is able to obtain a recalculation for adjustment in relation to the annual FBT km s to be driven. 3.4 Residual Value. The residual value (RV) will be the purchase price once the vehicle s lease contract has expired. Residual values are normally set by the ATO. The minimum allowable amounts are as follows: 12 Month lease - 65% 24 Month lease - 55% 36 Month lease - 45% Employees on Contract 59 may receive 100% of the profit from sale of the vehicle (Above the residual value) and operating costs. Any surplus from sale by LeasePlan that is returned to the University will be paid to the employee and will be subject to taxation at the employee s marginal tax rate. Contract 199 end of lease buy-outs, differ from Contract 59. If the employee wishes to buy his/her Contract 199 vehicle, LeasePlan will provide a buyout price which will be the market value of the vehicle at that point of time and is only valid for 30 days. For cars returned under Contract 199, LeasePlan will dispose of the vehicle on the wholesale car market. 4
4. Understanding the Commitment Under the lease arrangement the employee is responsible for the vehicle and all the lease commitments. You will be locked into a fortnightly payroll deduction arrangement based on the final costs outlined by LeasePlan in the Final Package Allocation which is received a short time after delivery of the vehicle has been accepted. The employee must ensure that kilometre targets are met in relation to the calculation of Fringe Benefits Tax annual requirements, and operating cost charges for the lease term. It is the responsibility of the employee to maintain the vehicle to a high standard, ensuring that all service intervals are met. Any damage must be repaired. If the vehicle is returned to LeasePlan with damage that is considered as unfair wear and tear, the employee will be required to meet the costs of repair. Information regarding Unfair Wear and Tear can be obtained by contacting LeaePlan directly on 1300 709 765 or cservice@leaseplan.com.au 5. Safety Nets Safety nets have been put in place to reduce the risk of liability to the employee. 5.1 Employee departs from employment This applies when the employee leaves the University and includes the following: Termination/Resignation Retrenchment Death For staff on a Contract 59 lease, should one of the above occur the employee has the following options: The employee (or the surviving spouse) may purchase the vehicle (at price determined by LeasePlan at time of cessation). A Reconciliation of operating costs will be completed by LeasePlan within 7-10 business days. The vehicle can be returned to LeasePlan. The employee would be liable for: (a) any excess pro-rata kilometre charges (b) any unfair wear and tear charges (c) any outstanding operational balances (d) any outstanding FBT provision and account deficit that may exist. Please note, should you wish to take advantage of the return option, you will by default, waive all rights to any refunds of unused budgets such as fuel etc. No settlement of operating costs will be generated by LeasePlan. 5
5.2 Employee does not depart from employment but wishes to return the vehicle Where the employee elects to return the vehicle, even though employment has not ceased, the following applies: (a) any excess pro-rata kilometre charges (b) any unfair wear and tear charges (c) any outstanding operational balances (d) any outstanding FBT provision and account deficit that may exist. A reconciliation of operating costs will be completed by LeasePlan within 90-100 days after the return. Please contact the Salary Packaging Officer for hand back options for Contract 199 leases as they differ to those provided above. 6. Lease End 6.1 Employee Purchase At the end of lease the employee may purchase the vehicle from LeasePlan. For vehicles leased on a Contract 59 basis, the purchase price will comprise the residual value plus GST. LeasePlan will then settle the actual vs. budgeted costs within 7-10 business days. The employee will be expected to pay any excess usage charges. Any unused provisions will be refunded. For vehicles leased on a Contract 199 basis, the purchase price will be at market value which is determined by LeasePlan. A Reconciliation of operating costs will be completed by LeasePlan, and these are completed 4 times a year, being January, April, July and October. 6.2 Vehicle returned to LeasePlan If the employee does not purchase the vehicle, the vehicle will be sold by LeasePlan on the wholesale car market. For cars leased on a Contract 59 basis, the employee may receive 100% of the net surplus on sale (above the residual value) and operating costs via an individual settlement process. The settlement period will be a maximum of 90-100 days. NB: When LeasePlan are performing these reconciliations, it is not only the sale proceeds of the vehicle, but also +/- of the operating costs used in establishing if a total profit/loss was made on the vehicle. For vehicles purchased on a Contract 199 basis, LeasePlan will sell the vehicle on the wholesale car market and 80% of any profit or loss will be forwarded to the University. Any charge or funds returned to the University will be proportionally split with the employee. 6
The employee s share of the surplus, if any, will be paid after an internal account and FBT reconciliation has occurred, less tax at the employee s marginal tax rate, into the employee s bank account. Please contact Employee Benefits for more information regarding vehicle and account settlements. 7. Infringement Notices The employee will be responsible for all infringement notices received relating to their vehicle. This includes traffic camera offences, parking infringements, and unpaid toll notices. All efforts will be made to contact you regarding outstanding infringements. In the event that the Employee Benefits office has been unable to contact you, personal details will be provided to the appropriate organisation based on details you provided at the time of ordering the vehicle. 8. LeasePlan Vehicle Reporting LeasePlan will, on a monthly basis, provide a vehicle report for each employee, that tracks the expenditure to date against the allocated costs. This will also show the kilometres travelled to date against the contracted allocation. These reports are based on the vehicles odometer reading that is supplied each time the fuel card is used. It is important to provide accurate information. These reports should be studied carefully as they contain important information regarding your vehicle s progress. These reports are available through the LeasePlan Online Portal. 9. Contacts Please contact the Employee Benefits Office, Human Resources Division on (07) 3365 1019 or (07) 3365 4668 or by e-mail Employee Benefits Office. 7
10. Procedures 10.1 Requesting Quotations You will need to create a User ID on the LeasePlan Online Portal. https://portal.leaseplan.com.au/irj/portal You must register using UQ s Customer Number 1000038072, and your UQ email address. You will then be sent an e-mail from LeasePlan that provides your user name and temporary password. You must reset the password the first time you log in to the portal. Once registration has been complete, you are free to create as many quotes as you like. 10.2 LeasePlan Quotation You will be sent a quotation setting out in detail, the cost of the vehicle, a breakdown of the operating costs and any Fringe Benefits Tax that may be applicable. The quote will show the monthly and annual costs applicable with the lease. This does not include the administration fee charged by the University. The total fortnightly cost including the administration fee can be provided to you either upon order request or at any time after the completion of the quote by contacting the Employee Benefits office. 10.3 Ordering a Vehicle Once you have completed the vehicle quotation, have read the document carefully, and wish to proceed; you will need log on to the LeasePlan Online Portal, and select request order. An authorisation request will be sent to the Employee Benefits office at which point we will confirm your eligibility to proceed with the order. Further documentation will then be sent to you from the Employee Benefits office. This includes a Motor Vehicle Lease Agreement between you and The University of Queensland, and a Payroll Deduction Authority outlining the fortnightly cost, and your agreement to have this deducted from your pre-tax fortnightly earnings. You must complete these documents and return them to the Employee Benefits office by email, along with a scanned copy of both sides of your driver s licence. The driver s licence will be sent to the delivering dealer for proof of garaged address. Once all the required documentation has been provided, the order for the vehicle will be placed with LeasePlan. Delivery time will depend on availability. LeasePlan will advise the delivery date as soon as possible after the order has been placed by way of an order confirmation document which will be emailed to you. 8
10.4 Vehicle Delivery Delivery of the vehicle is always to the University of QLD St Lucia Campus. The Employee Benefits office will sign for the vehicle on behalf of the University, to verify that the vehicle delivered is as per the original order. You will then be contacted by phone to collect the vehicle. 10.5 Fuel Cards You will be provided 2 fuel cards- Caltex and Shell as part of the lease arrangement. LeasePlan have negotiated with Caltex and Shell to provide discounts off the pump price. LeasePlan intend to have the fuel cards available at time of delivery. You must create a 4 digit PIN for use of your Shell card. This can be created on your initial use of the card. You will be required to provide the vehicle odometer reading each time you use the fuel card. If you are required to purchase your own fuel, LeasePlan will reimburse you the cost of fuel provided that the total claim amount is greater than $55.00. You must supply an original tax invoice showing number of litres of fuel purchased, GST exclusive and inclusive amount. Any amounts claimed will be deposited into your bank account by LeasePlan. All reimbursement claims for fuel should be forwarded directly to LeasePlan at the email address provided on the form. Please contact LeasePlan on 1300 709 765 to obtain the required form for reimbursement. 10.6 Registration Registration charges are included in the contract. The vehicle is registered in the name of The University of Queensland, and as such, initial registration certificate and CTP details will be retained by UQ on delivery of the vehicle. LeasePlan will renew the registration each year as required. The Employee Benefits office will keep a receipt from LeasePlan advising registration has been renewed. This will be forwarded to you for proof of registration renewal. Please note; from the 1 st of October 2014 registration labels are no longer required to be displayed. 10.7 LeasePlan Pocket Guide Each vehicle will be delivered with a pocket guide of emergency contact numbers for break down services, battery replacement, accident reports, and insurance instructions. This pocket guide can be found in your fuel cards wallet, and should be read. 9
10.8 Vehicle Servicing All scheduled servicing costs are included in the lease contract. For your nearest service provider, please refer to the following website; https://www.leaseplan.com.au/driver/tools/supplier-finder The vehicle must be serviced at a LeasePlan approved dealership service centre. 11. Fringe Benefits Tax (FBT) Year The FBT year is from 1 April to 31 March. It is within this period where you must achieve the estimated kilometres as stated in your lease contract. Contact LeasePlan if you require information regarding this aspect of vehicle leasing. 12. Fringe Benefits Tax Fringe Benefits Tax must be paid when the employee chooses the motor vehicle benefit option. The estimated FBT charge is shown on the lease contract and will be included in the fortnightly pre-tax payroll deduction. FBT is an annual calculation based on the cost of the vehicle (including GST) multiplied by a statutory percentage. The statutory percentage is a flat rate of 20%. If the vehicle was purchased during the FBT year, the FBT calculation will be on a prorata basis. Set out below are the percentages and kilometre ranges used for the FBT calculation. Less than 15,000 km s per FBT year = 20% 15,000 to 24,999 km s per FBT year = 20% 25,000 to 40,000 km s per FBT year = 20% Over 40,000 km s per FBT year = 20% If you feel you are unable to achieve the kilometres as estimated in the original lease contract, or your actual travel reflects a greater amount than that which has been budgeted, the contract can be re-calculated and this may increase or decrease costs. LeasePlan can be contacted regarding the options available. 10
13. Reportable Fringe Benefits Reportable Fringe Benefits are the grossed up value of fringe benefits (lease vehicle) and are shown on the employee s PAYG Payment Summary under Reportable Fringe Benefits. The amount shown as RFB represents what you would have received had the University given you the fringe benefit as gross salary calculated at the highest marginal tax rate. RFB amount shown on a PAYG Payment Summary is used in a number of income tests relating to various government benefits and obligations, including: Child Support Payments HELP and SFSS Repayments Medicare Levy Surcharge The Government Co-Contribution to Superannuation; and Rebate for contributions to a spouse s superannuation The RFB amount will also be taken into account in the income tests for the Family Tax Benefit, the Child Care Benefit, and the Parental Income Test for the Youth Allowance. (Some income tests may however, only include the non-grossed up value of the fringe benefit). The Reportable Fringe Benefits amount is not included in the employee s assessable income for taxation purposes. If you are in doubt about the effects of Reportable Fringe Benefits, the University strongly advises that you seek independent financial advice. For more information regarding FBT or RFB, please refer to the ATO website by clicking on the link below. https://www.ato.gov.au/general/fringe-benefits-tax-(fbt)/indetail/employees/reportable-fringe-benefits---facts-for-employees/ 11
14. Frequently Asked Questions Can I get a car of my choice? LeasePlan fleet discounts only apply to a limited range of vehicles. Please refer to the LeasePlan Online Portal for details. What is the lease period? The lease terms are 12, 24 or 36 months. How important is the estimated annual kilometres to my lease contract? The operating costs such as fuel and repairs are calculated on a per kilometre basis. If you exceed the kilometres on your lease contract you will be charged per excess kilometre. If you travel less kilometres than contracted, you may be entitled to a credit on the operating costs at the end of your lease. The University encourages staff to seek independent financial advice prior to entering into a Motor Vehicle Lease arrangement. Is my car insured? All LeasePlan vehicles are fully comprehensively insured, with the cost built into the lease contract. There is a $500.00 excess on the policy regardless of the age of the driver. The driver s kit provided with each vehicle will contain information regarding insurance and what to do in the event of an accident. Please note, should you wish to include replacement car hire in your lease, you will need to select this at the time of generating your quote on the LeasePlan Online Portal. Do I need to list other people on my insurance policy? No. Anyone who holds a current licence, and has permission from you, is able to drive the vehicle and will be automatically covered. How do I pay for the vehicle lease? The total cost of vehicle leasing will be paid under the salary sacrifice arrangement. To gain the best tax advantage, all costs will be deducted from pre-tax salary on a fortnightly payroll basis. What happens if I leave the University? The Safety Net as described previously allows for this. Generally, the only charges that you may have to pay are excess pro-rata kilometres and unfair wear and tear charges, plus your prorated FBT liability, as well as any deficits in your other provisions operating account. 12
What if I want to hand the car back even though I have not left the University s employment? Where the employee elects to return the vehicle, even though employment has not ceased, the following applies: (a) any excess pro-rata kilometre charges (b) any unfair wear and tear charges (c) any outstanding operational balances including loss on sale if applicable (d) any outstanding FBT provision and account deficit that may exist Please contact LeasePlan for hand back options for Contract 199 leases as these differ to those provided above. What happens if I go on paid sick, recreation, or long service leave? Payroll deductions to cover the lease will continue to be deducted from paid leave. What happens if I go on unpaid leave or the car is unable to be used for an extended period? You should discuss this with the Employee Benefits Office who will be able to inform you of your options available. 13
15. Arrangements for Senior Managers. A small number of senior managers at the University will receive a Vehicle Allowance as part of their remuneration package. Figure One: Vehicle Allowance Categories and Current UQ Allowance. Vehicle Allowance Category Current Allowance Provided by UQ 1 $21,000 2 $25,000 3 $31,000 4 $34,000 The amount of money in the second column of Figure 1 will be provided by the University as an annual allowance paid in fortnightly instalments through the staff member s salary, and is subject to income tax. The level of the staff member eligible for the vehicle allowance is set out in Figure 2 - Staff Categories. 14
Figure Two: Staff Categories Manager/Executive Vehicle Category Academic Staff General Staff 1 Centre Directors Level 10A 2 Heads of Medium and Small Schools, Faculty or University Centres Level 10B and C 3 Heads of Large Schools Level 10D 4 Deans, Institute Directors PVC s, DVC s and above Executive Director (Operations) and University Secretary University Librarian and Director of Learning Services 15