Car Salary Sacrifice pitfalls
Novated leases can be beneficial but:
- Future car value is often less than the residual or earlier lease payout value.
- The purported salary package gains can be over stated by novated lease bureau providers.
- Lack of direct comparisons means novated leases are sometimes unknowingly more expensive than no salary packaging.
- Bureau providers mostly only offer a novated lease option.
- Older replacement cars cannot be novated leased.
- Existing cars sale and novated lease back option is rarely viable.
- The car cannot be owned at the novated lease expiry date, due to the compulsory residual value.
- ATO residual guidelines can only be reduced by a fair and well considered future lower value. E.g. From Red Book or Glasses Guide, if not, the lease is not bona fide.
- The leased amount cannot be reduced by trade-in, or cash payment. If this occurs the lease is not bona fide.
- If the lease is not bona fide, then Property Fringe Benefits tax can apply in the future.
- Most novated lease outsourcers do not provide any other car salary package alternative, and so their reported gains from car salary packaging may well not be the optimum result.
Associate leases usually outperform novated leases but:
- They might not do so if the employee’s associate already earns a significant income.
- To participate the employee must have a suitable associate, but around 60% of employees do have a suitable associate.
We show you how to salary sacrifice and the best way of packaging your salary and usually without FBT