What to do at tax time – Novated Lease.

Its tax time

What does this mean for you and your novated lease?

In most cases there’s nothing you’ll need to do at tax time in relation to your novated lease, but you may notice a ‘Reportable Fringe Benefit Amount’ on your income statement.

What is a Reportable Fringe Benefit Amount?

As your taxable income does not include your salary packaging payments, neither does it include the savings you’ve achieved through salary packaging. Some such savings may be indicated as ‘Reportable Fringe Benefit Amounts’ (RFBA).

If you receive fringe benefits with a total taxable value of more than $2,000 in a fringe benefits tax (FBT) year (1 April to 31 March), your employer will include this amount on your income statement.

You aren’t taxed on your RFBA. It Is included in income tests for some government benefits and obligations.

If you have an FBT-exempt electric vehicle (EV) or plug-in hybrid electric vehicle (PHEV), you will have a RFBA showing on your income statement.

Are Novated Leases subject to FBT?

Novated Leases can require you to pay Fringe Benefits Tax (FBT) however in most cases this is offset by After Tax Contributions (ATCs) from your salary.

Paywise will collect ATCs in equal instalments throughout the FBT Year (FBT Year 1 April – 31 March), to avoid you being subject to an FBT obligation.

A Paywise team member will communicate with you if you have a shortfall of ATC. The most common reasons for a shortfall are:

  1. 1. A novated lease delivered late in March and there are no pays available to collect the required ATC prior to the end of the FBT Year (31 March)
  2. 2. if there is a period of missed deductions from your salary.
  3. 3. You end your lease early and there are no more pays available to collect the required ATC.

If you have other salary packaging benefits, you may be able to offset your FBT obligation by utilising your annual salary packaging ‘cap’ (typically $9,010 or $15,900). This will be reflected in your Reportable Fringe Benefit Amount (RFBA).

Income Statements and Reporting.

If you have an RFBA, this will be reported by your employer and shown on your income statement available via ATO online services through MyGov.

You will be required to advise your RFBA to certain government departments such as Centrelink and Department of Human Services as this may impact certain entitlements such as:

  • Centrelink payments
  • Child Support payments
  • Education debts such as HECS/HELP

See our page on general salary packaging tax time information.

The information provided is of a general nature. It is not financial or taxation advice. Paywise strongly recommends that you seek professional advice in relation to your salary packaging and taxation affairs.