How much fbt on novated lease

The fringe benefit tax year runs from 1 April to 31 March, and is assessed on an annual basis. FBT is calculated on the taxable value of the fringe benefit, and is separate to the income tax. It is important to know how to calculate your novated lease FBT to ensure it is lower than the income tax you would have paid on your salary. FBT status can also vary depending on the industry. Charitable organisations or government employees might be exempt for dollar limits on salary packaging.

Generally, there are two methods in which novated lease FBT is calculated — the Statutory Formula method the most commonly used , and the Operating Cost method. We explain both methods below:. Using this method, you will base the taxable value on a percentage of how far you travelled in kilometres during the FBT year.

You will have to take into account both private and business-related travels. If the novated lease vehicle is primarily used for business use, the Operating Costs method may be more effective. An employer or lessor will only be providing the employee with a car fringe benefit if the car lease arrangement is bona fide. If an employee provides a trade-in vehicle or cash contribution towards the purchase of the car, the employer or lessor must ensure this amount doesn't reduce the lease payments or residual value.

A trade-in credit or cash contribution can't be considered a deposit or down payment towards the purchase of the car at the end of the lease. Also, payments made under the lease are considered capital, not lease, payments. They are instalments under an arrangement to buy the car at some point. The employer should consider this when determining the cost price of the car. This is considered a bona fide lease because the lease payments and residual value reflect what would normally be payable under an ordinary commercial motor vehicle lease.

This tax can be used to your advantage through a Novated Lease. So there is a huge incentive for employees and employers to take up this workplace reward. While FBT is payable by the employer, the cost is passed on to the employee. Salary Packaging companies work this out for you and build the cost into your payroll deductions so you do not have to worry about meeting the expense at the end of each FBT year.