Did you know…?
July 2022
Tech Talk.
Salary Packaging / Novated Leasing
Full – FBT Status
Novated Lease Car Depreciation Limit – $64,741.
The ATO advises that there is a limit on the cost you can use to work out the depreciation of passenger vehicles (except motorcycles or similar vehicles) designed to carry a load of less than one tonne and fewer than nine passengers. The maximum value you can use for calculating your claim is the car limit (irrespective of any amount you were paid for a trade-in) in the year in which you first used or leased the car.
Effective from 1 July 2022 the car limit increases to $64,741.
| Financial year | Car limit | ATO Reference |
| 2022-23 | $64,741 | The indexation factor is 1.066, calculated as 413.8 divided by 388.1. |
| 2021-22 | $60,733 | The indexation factor is 1.027, calculated as 388.1 divided by 377.9. |
| 2020-21 | $59,136 | The indexation factor is 1.027, calculated as 377.9 divided by 368.1. |
| 2019-20 | $57,581 | No indexation – the indexation factor is 0.987, calculated as 368.1 divided by 373.0. (note: Annual Taxation Determinations for the car limit are no longer published.) |
| 2018-19 | $57,581 | TD 2018/6 |
Novated Lease Luxury Car Charge.
Cars that exceed the Car Depreciation Limit (as at 1 July 2022 is $64,741) have always had to be treated as loan transactions with the employer claiming depreciation and interest as a deduction rather than the lease repayments as a deduction. This results in the deductions claimable being less than the outgoing repayments. This represents an increased cost to the employer which should be recouped through an adjustment to the employee’s car package costs. We call this the ‘Luxury Car Charge’.
At Paywise, we reflect the Luxury Car Charge on our Estimate document provided when quoting on the affordability of a novated lease.
Luxury Car Tax.
There is also an increase to Luxury Car Tax (LCT) limits from 1 July 2022, up to $71,849 and for fuel efficient cars, $84,916. This tax is included on the invoice issued by the car dealership.
Staff Spotlight.
Meet Vera Oslopova
Vera is an Accounts Assistant at Paywise and responsible for accounts receivable, accounts payable and payroll processing.
When did you commence with Paywise?
November 2009.
Why did you want to work with Paywise?
I took up a casual position initially. After 5 months I was offered the role full-time, which I was very happy to accept as I loved the culture at Paywise (and still do) and am very pleased with my role of Accounts Assistant.
What are your hobbies?
I love to Bake and am an avid reader. I also look forward to walking long distances by the river and ocean.
Do you have any pets?
We had cats, dogs, Japanese koi (Japanese koi fish are colourful, ornamental versions of the common carp) and a sulphur-crested cockatoo. The sulphur-crested cockatoo was a great pet as we taught it to speak. They are intelligent and have learned how to open garbage bins as a source of food. In captivity, some will spontaneously dance to music with a variety of unique moves too. Nowadays, we’re just enjoying funny animal videos.
Favourite band and why?
Queen, Boney M, Smokie, they take me back to my happy student years.
Favourite movie or series and why?
The Notebook (I like real love stories) and the program “Getaway”. I used to travel a lot before getting married but now I like to watch travellers and their stories on TV.
Product Developments.
Residual Value Communications
With longer lead times on new cars, more people are hanging onto their cars longer. With a novated lease, the longer you hold onto your car, the more you could save with a one-third reduction on the FBT after four full FBT Years.
At Paywise, we recognise the reality that new cars are hard to come by nowadays, so we plan to be communicating with our members 12 months before their novated leases end.
We are developing a contact strategy which will ensure members have ample time to explore the options available to them, including finding a replacement or additional car in today’s new-car-supply landscape.
Carsales.com.au’s Paul Gover writes:
“Top-sellers like the Toyota RAV4 and Kia Sportage have been in short supply for more than a year. And the new Toyota LandCruiser was a sellout before first local deliveries took place in late 2021, with new orders taking more than a year to fill”.
Carsales.com.au’s Feann Torr writes:
Data shared with carsales revealed by Damien Meredith, the chief operating officer of one of Australia’s fastest-moving brands, Kia, says that “It takes a while to build up semi-conductor supplies. I think a lot of manufacturers are saying they’re going to be out of trouble after six months, but I don’t see that,”.
The online car supplier, pricemycar.com.au states:
“In 2022, Australian new car delays have hit historic highs largely due to COVID-related factors. Like other industries, vehicle production has been hit by factory closures and logistics problems but in addition a global supply shortage of semiconductor computer chips has caused huge production delays around the world.”
Whilst the average wait time for a new car in Australia is 140 days, in WA, the average wait time is 215 days, around 7 months.
| By state | |
| Western Australia | 215 days |
| Northern Territory | 180 days |
| Victoria | 144 days |
| New South Wales | 140 days |
| Queensland | 140 days |
| Tasmania | 136 days |
| South Australia | 133 days |
| Australian Capital Territory | 115 days |
Updates.
Labor’s new tax plans
The new Federal Government has pledged from 1 July 2022 to cut government taxes on non-luxury electric vehicles (EVs) including plug-in hybrid and hydrogen fuel-cell vehicles.
Part and parcel of Labor’s EV strategy is the promise to cut import taxes and fringe benefits tax (FBT) for EVs that fall below the luxury car tax threshold of $84,916 from 1 July 2022.
Once the legislation is written, it will need to be passed by both houses of parliament and receive Royal Assent.
If this change is legislated , it may result in the abolition of FBT for an EV (under the $84,916 limit) salary packaged as a novated lease, which is illustrated below based on current rules around the employee contribution method (ECM):
| Annual FBT Liabilities | Proposed policy – Maximum effective Annual PAYG Savings across marginal tax rates without FBT (up to a $200k salary) | |||
| Car FBT Base Value (excluding GST) | ECM (post-tax) | 34.5% | 39% | 47% |
| $50,000 | $10,000 | $3,450 | $3,900 | $4,700 |
| $70,000 | $14,000 | $4,830 | $5,460 | $6,580 |
| $84,500 | $16,900 | $5,832 | $6,591 | $7,943 |
The following vehicles are examples of those that are included in the above proposed change:
- Mitsubishi Eclipse Cross PHEV
- KIA Nitro PHEV
- Tesla Model 3
- KIA EV6 GT-Line
- KIA EV6 Air
- Nissan Leaf e+
- Nissan Leaf ZE1
- Mercedes-Benz EQA
- Mini Hatch Cooper SE
- Volvo XC40 Recharge Pure Electric
- Hyundai IONIQ 5
- Hyundai Kona
- Polestar 2
- BYD ATTO 3 Superior
- Lexus UX300e
The value of salary packaging in today’s economy
With fuel prices soaring, increased living expenses and interest rate hikes, now more than ever, the value of salary packaging to employees can be realised.
At no cost to the employer, the employee can get a real, grossed-up benefit and more disposable income when salary packaging things like:
- A new car
- General living expenses
- Meal & entertainment
The tight employment market is also showing that it’s a candidate’s market and that employee benefits can be the difference when trying to attract and retain the best people.
Tips and Hints.
Fuel price increases
Did you know that with the skyrocketing fuel prices, there has never been a better time to be running your car with a novated lease?
Consider this example of purchasing $124.00 of fuel:
| Litres purchased | 54.65 |
| Pump price per litre | $2.27 |
| Receipt amount | $124.00 |
| GST included | $11.27 |
| Motorpass discounts | $1.09 |
| Novated lease account debit | $122.91 |
| Novated lease account GST credit | $11.17 |
| Net fuel cost to novated lease account | $111.74 |
Real cost when salary packaging and paying in pre-tax dollars:
| Tax Bracket | $18,201-$45,000 | $45,001-$120,000 | $120,001-$180,000 | $180,000+ |
| Marginal tax rate | 19% | 32.5% | 37% | 45% |
| Packaged cost | $90.51 | $75.42 | $70.39 | $61.46 |
| After tax per litre cost | $1.66 | $1.38 | $1.29 | $1.12 |
| Saving | $34.87 | $49.72 | $54.67 | $63.48 |
| Saving per litre | $0.61 | $0.89 | $0.98 | $1.15 |
Member Spotlight.
Albert, took possession of a Mazda CX-30 DM4WLA G25 Astina Wagon 5dr SKYACTIV-Drive 6sp i-ACTIV AWD 2.5i and said:
“Hi Paywise, Yeahh… finally I got my car today. Thank you for your support and attention. Cheers 🥂”
Commendation and praise to Scott, Grant and Mekha from the Paywise team who assisted Albert with this Novated Lease.
Alison, took possession of a Mitsubishi ASX Wagon XD MY22 ES Wagon. 5dr CVT 1sp 2WD 2.0i and passed on this message:
““Thank you so much. And thanks Conor, for your assistance and efficient service!.”
Commendation and praise to Conor and Mekha from Paywise who assisted Alison with this Novated Lease.
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