ADF salary sacrifice car: Salary Sacrifice Car Benefits

Novated leasing provides employees with access to new cars in an economical, tax-effective and hassle-free manner for employers.

ADF salary sacrifice car benefits and salary packaging can help save on taxes for fuel, registration, insurance, and novated lease agreements. 

Benefits of a Novated Lease

Novated leasing is an attractive car finance solution, providing significant tax advantages for some individuals. But this form of car financing may not suit every buyer, just as car loans or chattel mortgage financing don’t meet everyone’s needs.

Novated leases operate differently from traditional car loans in that their payments come directly out of pre-tax income – this reduces income tax liability while saving money on vehicle purchases and running costs.

Dependent upon your employer’s novated leasing policy, GST could be excluded from lease payments, potentially saving a considerable amount on costs like fuel, servicing, tyres and registration.

Although novated leasing may appear complex, its process is actually very straightforward for both you and your employer. It is because leasing companies handle all of the administrative work for you – leaving you to focus on enjoying your new or pre-owned car!

No Upfront Deposit

Novated lease arrangements also track how your vehicle is used for business and personal purposes, helping you claim maximum deductions during tax season. Of course, prior to making decisions about salary sacrifice, it is wise to speak with both your employer and financial advisor prior to entering any agreement.

Salary packaging offers many benefits to employees, including novated leases. Other examples may include annual gym memberships and flight club memberships. Speak with both your employer and specialist novated leasing provider about available options; no matter which car model or make may be eligible through salary sacrifice, so explore all that might be available!

No Tax on Running Costs

Novated leases exempt you from paying tax on vehicle operating costs such as fuel, servicing, tyres and maintenance; instead, the leasing company covers these expenses on your behalf. However, to prevent overpayment for fuel, accurate records of mileage travel must be kept.

ADF members must pay income tax on all income earned during an income year, but some may qualify for exemption due to serving overseas on operational duties.

Salary packaging is an arrangement between you and your employer whereby certain benefits or expenses are paid for out of pre-tax income to reduce taxable income. Some expenses paid from salary sacrifice arrangements are fringe benefit tax (FBT) exempt and may even transfer with you when switching employers; other expenses, however, may impact superannuation entitlements or government benefits, so it’s wise to consult a financial adviser before entering any salary sacrifice arrangement.

No Extra Costs

ADF salary sacrifice car benefits (also referred to as novated leasing) is a three-party agreement among an employee, their employer and a finance provider. An employee uses pre-tax salary payments from pre-tax salary to cover lease repayments and running costs (including GST) during the lease term; at its conclusion, they may make a residual payment to own outright (or upgrade with a new lease agreement).

A leasing car can help reduce costs significantly by not paying GST (around 10% on new car purchases), which the finance company will then claim back and include in your lease payments as the car’s ex-GST price.

Salary packaging reduces your taxable income and makes you pay less income tax overall, providing more funds for home loans, school fees and childcare expenses as well as salary sacrificed superannuation contributions, novated lease cars available through various car leasing arrangements, self-education expenses or membership dues/subscriptions.

Boosting Employee Recruitment

With many employers experiencing staff retention issues, a salary sacrifice car scheme can be a great way to attract new talent. The schemes are simple to implement and can be managed by third-party providers who handle all aspects of vehicle sourcing, tax compliance, insurance and maintenance.

As a bonus, the schemes can reduce companies’ grey fleet of employee cars, which are often older vehicles that produce more emissions than company or leased vehicles. It is particularly important as it helps organisations meet their duty of care obligations and contribute to their sustainability goals.