Novated lease guide
Contents
1.0 Introduction
1.0Introduction
1
2
3
4
6
1.1 What is novated leasing?
1.2 How does novated leasing work?
1.3 Benefits of a novated lease
1.4 Novated lease vehicle packaging comparison
2.0 Understanding the costs 8
8
9
2.1 Novated lease finance costs
2.2 Vehicle running costs
3.0 Understanding the tax benefits 12
12
14
15
16
3.1 Fringe Benefits Tax (FBT)
3.2 Employee Contribution Method (ECM)
3.3 Days not available
3.4 Example calculations
4.0Helping you keep track of your novated lease 18
5.0 Getting started
19
6.0 Additional lease information
20
20
20
20
21
21
22
22
22
22
6.1 Lease terms
6.2 Eligible vehicles
6.3 Residual values
6.4 Luxury Car Tax (LCT)
6.5 Luxury Vehicle Income Tax (LVIT) adjustment
6.6 Lease reconciliation
6.7 Lease end
6.8 Employment cessation
6.9 Early termination
7.0 Common novated lease terms
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 1300 888 870.
This guide will be updated from time to time, so please contact us
regularly to ensure you have the latest information.
Novated lease team
1300 888 870
novated@toyota.com.au
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1
1.1 What is novated leasing?
——
pricing when you buy a car, saving you even more money.
A novated lease may mean you can drive the vehicle of your choice,
without compromising your lifestyle, and you could save thousands
A novated lease may allow you access to corporate fleet discount
——
At the end of your novated lease, unlike conventional company
on the purchase price and running costs of a new or used car, or even
vehicle arrangements, you may be able to take advantage of any
the car you currently drive.
surplus between the market value of the vehicle and its residual
value (plus GST).*
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.
1.2 How does novated leasing work?
Novated leasing simply means that your employer pays for your
Novated leasing is a form of salary sacrifice or salary packaging. It is a
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:
——
——
* Conditions apply.
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
Novated leasing is recognised by the Australian Tax Office (ATO)
the term of your employment. You generally have responsibility for
as a tax-effective way to salary package.
the vehicle itself.
Novated leasing allows you to choose the vehicle you want.
All three parties agree to individual obligations through a TFM
You can even sacrifice additional salary to package more
novated lease agreement.
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.
——
You
No cash, no worries – all fuel and other vehicle expenses can
be covered in the monthly lease payment. We take care of
Vehicle lease
Novation
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
Your
Employer
Toyota Fleet
Management
example, by using a TFM Fuel Card you’ll get a discount every time
you fill up your tank.
Vehicle lease/
Operating costs
2
3
1.3 Benefits of a novated lease
Convenient and cashless motoring:
With a novated lease from TFM, everyone wins. From tax and cost
——
provides discounts through a number of major fuel providers.
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
——
——
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,
——
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:
——
automatically deducted from your salary.
GST credits (input tax credit), on the initial vehicle purchase
(capped in accordance with the Luxury Car Limit).
You may be able to benefit from corporate fleet discount
All your vehicle servicing and repairs can be paid for through our
Repair Authorisation Service.
extra benefits:
——
Our TFM Fuel Card is a convenient way to pay for fuel and also
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.
programs, which can significantly reduce the recommended
retail price of a car.
——
Vehicle running costs can be managed by TFM, so you enjoy
access to our discount servicing and maintenance costs.
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5
1.4 Novated lease vehicle packaging comparison
Assumptions made in the example demonstrated in the table
Compare the potential savings when you finance your vehicle through
on the left hand page include:
a TFM novated lease.
——
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
Private
purchase
Total vehicle
on-road cost
$47,921.50
——
With novated
lease
$42,435.95
Fleet
discounts
reduce the
vehicle
purchase
price.
has been made to provide an accurate representation at time
of preparation, costs provided are indicative at time of quoting
and subject to change.
——
$47,921.50
$39,084.04
48 months
48 months
$15,498.47
$15,498.47
20,000km
20,000km
$888.94
$699.46
Maintenance
$58.89
$53.54
Tyres
$26.50
$24.09
$308.00
$280.00
Comprehensive
insurance
$83.33
$83.33
Registration
$78.99
$78.99
$0.00
$25.00
$1,444.65
$1,244.41
Savings per
month
$200.24
Lease term
Residual value (inc GST)
Km per annum
——
Novated
lease
finance is
further
reduced by
GST credits.
Fuel
Management fee
Total monthly cost
6
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.
Lease costs (monthly)
Finance
Vehicle discounts are based on Toyota Fleet discount scheme
and subject to eligibility.
Factors
Amount financed
Quotes prepared as at 01 November 2012. Whilst every effort
——
Running costs are budgeted and dependent on actual cost with
a reconciliation adjustment during and/or at end of lease.
Enjoy the
benefit of
GST credits
for vehicle
running
costs.
——
All lease costs quoted are per month unless otherwise stated.
——
Comprehensive insurance cost is an estimate; actual cost
depends on the individual application.
7
2.0 Understanding the costs
2.1 Novated lease finance costs
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
The total amount financed through your novated lease is calculated
running costs are based on your lease term and the nominated
by taking into account the cost of the vehicle and its accessories, the
number of kilometres you are likely to travel.
lease term, current interest rates and market value of the vehicle at
lease end.
Fuel Card
Vehicle purchases attract GST. However, TFM can claim a GST credit
Buying fuel is easy with our TFM Fuel Card. You’ll enjoy significant
(input tax credit) when we finance a vehicle under a novated lease.
discounts on the pump price (via a rebate) at all BP outlets, as
You benefit because this effectively reduces the vehicle price.
well as over 80% of service stations operating through the
We then pass the benefit of any GST credit to you and reduce the
national Motorpass network. The TFM Fuel Card can also be used
amount being financed (capped by the Luxury Car Limit).
in conjunction with supermarket docket fuel discount offers for
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.
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
Registration and CTP insurance
Roadside assistance
A novated lease covers the full registration and CTP insurance
If you want the reassurance of roadside assistance or motor
amounts in your monthly payment. In states where CTP can
club membership, you can include these additional costs in your
be purchased separately, our buying power achieves very
monthly payments.
competitive rates.
Reimbursement
Comprehensive insurance
All personal vehicle-related costs like re-registration can be
Whether you choose Toyota Insurance or your own insurer, we include
reimbursed simply by completing a personal expense form
budgets and can arrange payment on your behalf.
located at novatedonline.com.au
Renewal management
Fees and charges
Another great advantage of a TFM novated lease is that we remind
These include an establishment fee and ongoing monthly
you of any registration, CTP and comprehensive insurance renewals
management fees. Variation fees and reimbursement fees may
well in advance of due dates and also arrange renewal. Please note
apply if there are excess requests for reimbursement or if you
that it is your responsibility to ensure that the vehicle is registered at
want to change your agreement. All TFM fees will be fully explained
all times.
in your employer’s vehicle policy and also in your novated lease
terms and conditions.
Novated lease protection
TFM offers payment and gap insurance through Toyota Insurance*
Please note:
which will continue to pay your lease for up to six months and
——
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 137 200. Toyota Insurance is a division of Aioi Nissay Dowa Insurance Co.,
Ltd. ABN 39 096 302 466. AFSL Number 254489 (Andia).
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Tolls and parking cannot be incorporated into your novated
lease payment.
provides a vehicle hand-back option if you don’t gain employment
——
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.
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3.0 Understanding the
tax benefits
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%.
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
Statutory %
is based on the number of kilometres you are likely to travel during
Until 10 May 2011
the FBT year, from 01 April to 31 March, not on the anniversary of
0 to 14,999km
26%
15,000 to 24,999km
20%
By novating a vehicle, your lease costs are salary packaged through
25,000 to 40,000km
11%
a combination of pre-tax and post-tax deductions, meaning you
40,001km plus
7%
your lease signing or the Australian financial year.
have less taxable income. However, because you benefit from this
arrangement, it is deemed a ‘fringe benefit’ under taxation law. As a
Transitional FBT
result, two types of tax apply: Income Tax for your cash salary and FBT
From 01 April 2012 – 31 March 2013
for your vehicle. You still come out on top if you make sure you meet
0 to 24,999km
20%
25,000 to 40,000km
17%
40,001km plus
13%
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
From 01 April 2013 – 31 March 2014
0 to 40,000km
20%
readings each time you fill up, which means we can help you track
40,001km plus
17%
and calculate your FBT obligations in accordance with ATO guidelines.
From 01 April 2014
An example of the FBT ATO Statutory Rates is demonstrated on the
0km plus
business and personal use. Your TFM Fuel Card captures odometer
right hand page.
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Annual kilometres travelled
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 2014.
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3.2 Employee Contribution Method (ECM)
FBT calculation using the 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.
FBT
cost
base
x
Statutory
rate %
FBT
taxable
value
x
FBT
gross-up
/
Days
in
FBT
year
(365)
x
Days
available
(days in
FBT year
less days
unavailable)
x
FBT
tax
rate
=
FBT
liability
ECM has greater tax benefits than a purely pre-tax sacrifice approach
-
Employee
post-tax
contributions
=
FBT
taxable
value
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
3.3 Days not available
nominated kilometre target under the ECM method. However, if you
Sometimes your vehicle may not be available for travel. In these
do not achieve your kilometre target, you will be liable to pay a higher
instances you are entitled to a reduction in FBT. ‘Days not available’ is
FBT amount.
applicable when:
If you earn $180,000 or more per year, Statutory Method without ECM
——
one whole business day or more.
and Statutory Method with ECM salary packaging options deliver the
same benefits.
Your vehicle is off the road for accident or mechanical repairs for
——
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.
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3.4 Example calculations
Comparison calculation for non-packaged, statutory
packaged and ECM packaged
FBT calculation using the Statutory Method
Without salary
packaging
Simple annual FBT liability calculation
(A)
FBT cost base^
(B)
Distance travelled
(C)
FBT statutory percentage
(D)
FBT taxable value (A x C)
Salary package
x
$8,001.19
FBT gross-up
(E)
x
FBT tax rate
(F)
=
FBT Liability
Gross-up
2.0647
(F)
FBT tax rate
46.50%
x
2.0647 (E)
x
46.50% (F)
FBT
Salary packaged –
statutory with ECM
$80,000 Salary package
$14,933 Vehicle package
$7,682 Pre-tax ECM GST
$80,000
$6,932
$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 2012.
(E)
$8,001.19 (D)
Vehicle package
20,000km
^ W here 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)
$80,000 Salary package
$40,005.95
20%
Salary packaged –
statutory without ECM
=
FBT Liability
$7,681.83
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.
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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
email 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
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 1300 888 870 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.
account any time via our online portal, novatedonline.com.au
4. You’ll receive the lease documentation to complete.
You can see the number of kilometres already travelled and how many
5. Simply sign the lease documents with your employer and return
you still need to satisfy your FBT requirements. It also includes your
insurance and personal details and itemised expenditure related to
your account.
them to TFM.
6. We will order your vehicle and confirm a delivery date.
7.
Legal documentation
Your novated lease agreement clearly shows details of your legal
obligations to TFM, your employer and yourself in regard to your
We will arrange delivery of your vehicle.
8. We will notify your employer, arrange payroll deductions and
mail your TFM Driver’s Kit.
novated lease.
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.
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6.0 Additional lease
information
ATO residual value table
Lease term (months)
Residual value %
12
65.63%
24
56.25%
36
46.88%
48
37.50%
60
28.13%
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
6.4 Luxury Car Tax (LCT)
Vehicles with a GST-inclusive value above the applicable LCT limit
You can choose a vehicle of any make or model to suit your personal
will be subject to LCT. The current rate of LCT is 33% and is payable
and business lifestyle, whether it’s a new or used passenger sedan
on the GST-exclusive value of the vehicle above the applicable limit.
or hatch, SUV or 4WD. Under ATO law, boats, caravans, trucks and
motorbikes cannot be novated.
6.5 Luxury Vehicle Income Tax (LVIT) adjustment
Use of the statutory method requires that the vehicle be a ‘car’ for
Special tax accounting rules apply if you lease luxury vehicles valued
FBT purposes, being a vehicle which is designed to carry less than
above the LVIT limit ($57,466 at date of publication). These rules
one tonne and fewer than nine passengers. A vehicle that is not a
re-characterise the lease as a sale and loan transaction. Your
car may be subject to additional FBT liabilities.
employer needs to account for your luxury vehicle novated lease
as a ‘loan transaction’ which can result in increased costs for both
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.
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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.
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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.
7.0 Common novated
lease terms
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 1300 888 870 to
receive a lease payout quote. A payout figure will be calculated
and the reconciliation process will begin.
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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).
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Goods and Services Tax (GST)
About this guide
The standard GST rate of 10% is applied to vehicle purchases and
This guide has been developed by TFM to provide you with
running costs. As a novated lease customer, you benefit from GST
information about the selection, establishment and ongoing
credits (input tax credits) on your vehicle’s purchase price, finance,
management of a novated lease.
maintenance, tyres, running costs and fuel.
Financial advice
Lease
In Australia, there are certain taxation benefits to acquiring a vehicle
This is a legally binding agreement between two or more parties,
through a novated lease. It is recommended that before making any
where one party supplies a product or service, and another party
decision, parties should seek appropriate advice from their taxation
pays to use the product or service for a period of time.
consultant or financial adviser regarding the benefits of this financing
option, including its treatment under income tax, FBT, GST law or
Luxury Car Tax (LCT)
relevant state and territory laws where applicable.
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).
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
How to contact TFM
Phone: 1300 888 870 Fax: 02 9430 0918
Email: novated@toyota.com.au
tax benefit.
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Move forward with us
1300 888 870
novated@toyota.com.au
toyotafleetmanagement.com.au
Toyota Fleet Management is a division of Toyota Finance Australia Limited ABN 48 002 435 181.
Australian Credit Licence 392536. A member of the Toyota Group of Companies. TFM002 (1/13)