Big Cash Flow and Tax Savings
The key benefits for employees of small businesses is that novated leases dramatically improve employees’ cash flow and they get the benefits of GST and income tax savings. The annual tax benefits are in the range from $2,000 to $5,000 depending upon the cost of the car and the employees’ rate of margin income tax.
These benefits are for no business use of the car. If there is a more than 50% business use then the benefits really start to increase above the normal range of $2,000 to $5,000.
Directors and Self Employed Small Businesses
If you pay yourself a salary / wage each week, fortnight or month then you as the business owner will be able to salary package a vehicle on a novated lease. You have to be an employee to enter into a novated lease as there are three parties to the lease – employee, employer and the financier.
You can also salary package a novated lease for a partner / spouse that is not even employed by the business. Here at One Car Group we have packaged cars for ourselves, wives and adult children.
Salary packaging is a more tax effective solution for owner / director employees for the following reasons:
- Personal income tax rates are higher than small business income tax rates – 10% plus higher personal tax rates over small company tax rates. So salary packaging increases the tax benefit when compared to running the cost through the company books.
- If you use the vehicle for business then you get to claim the business use percentage just like you would if the vehicle was financed through the company
- You get to salary package the running costs which again are offset against your higher personal income tax rates – therefore a bigger tax saving
- When you sell the car any profit on disposal is tax free via a novated lease. Compared to a profit on sale of a vehicle in the company will be taxed in the company
Providing Novated Leases to Your Employees
If you allow employees to enjoy the benefits of salary packaging then you are effectively giving them a $2,000 to $5,000 after tax annual pay rise with no additional cost to your company.
Many large employers have been providing novated leases to their employees for 20+ years. If you are competing with these employers to hire and retain staff then you are at a disadvantage when they offer novated lease tax benefits to staff that deliver $2,000 to $5,000 annual tax benefits.
Quick Set-up and Easy Administration
One Car Group provide a very easy set-up and ongoing administration at no cost to you, the employer. We provide all the information to show you how to schedule payroll deductions, we invoice you weekly, fortnightly or monthly for the deductions and manage the disbursements to the financier and all other suppliers for the running costs included in each novated lease. The costs of management are paid via the employees’ payroll deductions.
If an employee leaves your employment during the term of the novated lease then the car and the finance obligation goes with them and you have no ongoing commitments for the novated lease.