Are the novated lease benefits you enjoy today at risk?

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January 2012 update: For the latest information about the 2011/12 novated lease budget changes, please click here.

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Everybody seems to love a tax break! And the salary packaging of novated leases certainly offers an attractive tax break for motorists. It was first introduced a couple of decades ago to help alleviate the administrative burden that required drivers to maintain a log book. Since then, novated leasing has grown immensely in popularity. It is estimated that today more than 20% of all cars are sold via such an arrangement. So novated leasing not only provides motorists with a tax break, but is also quite important to the Australian car manufacturing industry.

The problem is that with Novated Leasing, the more you drive, the larger your tax break. Many people argue that novated leasing encourages excessive driving, and so is not good for the environment. In fact, Ken Henry, Australia’s Treasury Secretary, is reviewing the merits of novated leasing to work out whether to keep this benefit alive.

I thought that it would be a good idea to run a poll to see what you would recommend to Ken Henry…

Click here to vote in the poll…

Let’s have some fun with this and see where it goes!

Deven

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8 Responses to “Are the novated lease benefits you enjoy today at risk?”


  1. 1 Denis September 4, 2009 at 5:41 pm

    It’s fairly obvious that some reform is necessary. A tax system that encourages doing more kilometres than you really need to, is crazy in this day and age. Obviously, we would not want to lose the concession, so we need to come up with a system that benefits the environment as well as stakeholders. I think it will have to be something that encourages use of low-emission vehicles.

  2. 2 Andy smyth September 7, 2009 at 4:31 pm

    Given that the tax benifts in this country benifit all but the taxpayer and also that should you decide to buy a new house if your a foreigner and own propery off shore you are entitled to the full tax benifits including the first home owners grant. Great bloody country that they give you money towards a new house!!!

    Also by the fact that I am of the age where we got nothing even if we fought a war we should not have been involved in and have been deficated on from a great hight by all on sundry exept where it is worth a vote? we did a great job and the country is proud of us. Bull—- we were spat on and s— on then and this is still the case. Giveth with one hand and taketh away with the other all for what some bloody politisn wanting the Green vote leave us honest tax payers alone and tackle the ones who are realy ripping the system off.

  3. 3 Warren September 8, 2009 at 7:53 am

    All this fails to recognise the original reason why the km brackets were established, it was not to reward drivers who travelled excess kms, rather, in recognition that a company veheicle provided to a sales rep or maintenance staff was not a luxury, but a necessity, and it was these vehicles that would be expected to travel high kms and hence attract a lower tax rate. On the other hand, a vehicle given to a desk bound senior manager was more likely to be used as a way of increasing remuneration outside of the tax system; was likely to travel far less kms, and was therefore taxed accordingly.

    Further, if the Government is really interested in the environment, then it should be encouraging LPG and LNG usage and not introducing excise on these fuels. Both of which have ~ 60% less GHG emmisions than ULP or diesel in automotive applications. However, this would require some vision on behalf of Government, who seem much happier to simply allow our (comparatively) low emmisions energy resources to be sold off overseas at bargain basement prices, rather than invest in the infrastructure needed to more broadly embrace them.

    I suspect the outcome will be like most reviews, very little intellect applied by Government; a solution that is the most politically palatable, and no meaningful consideration for the long term impact on the economy or the environment.

  4. 4 ceosmartsalary September 22, 2009 at 10:32 am

    Warren,

    Indeed! The current kilometres-based concession for novated leasing helps to simplify administrative requirements, alleviating the need for log books. Of course in our current age of global warming, it appears a bit anachronistic.

    Deven

    • 5 ceosmartsalary September 22, 2009 at 12:49 pm

      Thanks everyone for sharing your opinion in our novated leasing poll.

      It looks like just about everyone (98%!) wants some kind of concession in place for novated leasing. About a third of you want to leave the concession as it is. And two thirds want to modify the concession to something that is a little more green-friendly, whether it be to: (a) increase the number of kilometres brackets, (b) apply a flat rate, or (c) make it emissions based. Interestingly enough the most popular of the three suggestions appears to be to apply a flat tax break. This means that all novated leases would get the exact same break, thereby eliminating the need to drive more.

      Clearly people think this concession is a valuable one and don’t want it to disappear completely. Perhaps a phased strategy would make most sense? In the first phase, we could simply apply the flat rate (as so many of you suggested!) and then move gradually to an emissions based concession, as more locally manufactured low-emission petrol, hybrid and electric vehicles begin to appear on the horizon.

      Deven

  5. 6 Mark Moffatt November 17, 2009 at 9:34 am

    In regard to promoting extra driving there-fore increasing stress on the environment I would suggest that this would be a minority of leased vehicles.
    My family are situated in a country town & transit to various locations, for this reason we have purchased vehicles that are low on fuel consumption, Diesel Renault 5.7L/100Km consistantly & a C3 Citroen which is similar in consumption.

  6. 7 Dianne warren June 15, 2010 at 9:08 pm

    At present I send in a copy of my credit card expenditure and receive the threshhold benefits Is this now against the law and must I use a debit card. i have tried to get an answer to this question as I don’t know what is right or wrong . PPlease answer me.

    • 8 ceosmartsalary June 25, 2010 at 3:51 pm

      Hi Dianne

      Actually, there haven’t been any changes to the law recently that affect the ability of employees to claim credit card payments under the tax-free benefits cap (available to public hospitals and some PBIs).

      Are you packaging through SmartSalary? If so, I can confirm that the credit card reimbursement process you describe in your post continues to be acceptable. If not, then it would be best to contact your provider and have them confirm this for you.


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Deven Billimoria
Chief Executive Officer
Smartgroup

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