How Simplified FBT Rules Helps in Boosting the Novated Leasing Industry

Employees are about to benefit more with the simplification of the FBT rules promotes a boost on the novated leasing market. Novated leasing has been a favorable option for employees in acquiring a car, on a regular basis, now with the FBT rules simplified, tax changes become an additional lure for employees to go for a novated lease instead of securing a loan to purchase a new car.


Photo Credit: via Pinterest

Salary packaging is a form of novated lease from LeaseXpress and other novated leasing companies that enables an employee to buy a new car every three to five years while gaining some extra tax benefits compared to the traditional for of loaning a car. It is referred to as a novated lease because the finance agreement is used to by a new car or a late model second hand car that involves the employees, the employer and a finance or leasing company. Lease payments are then made to the finance company by the employer on behalf of the employees. The savings are eventually created from the combination of pre-tax and post-tax contributions.

At present, there is already a growing demand in individuals leaning into novated leasing as a way to acquire a new car. The recent change in the taxation rules related to the FBT has a very significant impact into this decision. The recent change meant that a flat rate of 20% FBT will be applied to a novated lease regardless of the number of kilometers it has annually travelled. This made a confusing part of novated leasing less baffling.

The recent change also made it easier to new novated lease customers to look into this option for the first time without having to struggle with understanding the technicalities that comes with the lease. The benefits come from FBT, PAYG and GST savings. The recent change also encouraged people to drive more further each year to be able to reduce their FBT bill.

The usual perception that you can only get savings if you drive 20,000 kilometers each year is now over.  The group of novated lease drivers who drive less than 15,000 kilometers will not be having a hard time converting the savings that were negligible during the old FBT rulings.

This recent consolidation in the novated leasing market will allow mid-sized players to have access to a broader market especially for those who are looking for a different relationship model in novated leasing.



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