The benefits of novated leasing

A novated leasing is a tax effective way to purchase a motor vehicle. The finance and running costs of your vehicle are paid for by your employer who recovers these costs from your pre-tax salary. The associated tax benefit is what makes novated leasing an increasingly popular method of financing a car.

Novated leasing comes in a finance only arrangement and a fully maintained version. A finance only novated lease is an agreement entered into with a financier. The running costs, salary deductions and fringe benefit tax (FBT) requirements are managed by the employee and their employer.

Entering into a fully maintain novated lease allows these aspects to be managed by a company specialising in novated leasing. This simplifies the process and reduces the administration costs to the employer. A fully maintained lease also provides the employee with an estimate of the tax advantage they will receive.

How does a fully maintained novated lease work?

 

A fully maintained novated lease incorporates the finance for the vehicle and budgets for its running costs. These budgets will depend on the vehicle selected, the term of the lease and expected annual kilometres to be travelled.

The total vehicle cost is worked out over the term and then divided into equal monthly amounts. These monthly amounts are invoiced to the employer and recovered tax effectively from the employee’s salary.

Who can have a novated lease?

 

Generally speaking novated leasing is available to any employee with their employer's permission.

Where do I start?

 

Speaking with a novated leasing provider is the easiest way to get a better understanding of the process and the potential tax benefits. However, it is a good idea to do some research first. Start by investigating potential vehicles that suit your needs. It is wise to select a vehicle that has strong resale qualities as this will reduce the total cost of the lease.

The vehicle can be new or used and can be purchased from a dealer or private seller. It helps to have an idea of the annual kilometres you expect to travel and how long you intend to own the vehicle.

How much tax benefit can I receive?

The tax benefit from a novated lease is via savings in income tax and GST. This saving will depend on a number of variables including the price of the vehicle, the term of the lease and the intended kilometres travelled.

Although, a better tax advantage is generally gained the more kilometres travelled, significant savings can still be made for those who travel less kilometres. Below is an example of such circumstances.

Oliver has an annual salary of $90,000 and travels only 7,000 kilometres per annum. He is looking to lease a brand new $26,000 Corolla over a 3 year term. Based on this information his taxable income could be reduced by about $5,000 per annum.

By reducing his taxable income by $5,000, Oliver saves $1,925 per annum in income tax. Oliver also receives $500 of GST claimed back by his employer each year. The combined tax benefit for Oliver is more than $7,000 over the three year term.

If Oliver travels 20,000 kilometres per annum, he receives a much greater tax advantage. His taxable income is reduced by about $7,000 per annum and his employer can claim $700 per annum of GST on his behalf. This results in a tax benefit of over $10,000.

Novated leasing may not work in all financial situations and independent financial advice is always recommended when it comes to your personal finance matters. However, a fully maintained novated lease has the potential to provide significant tax advantages when purchasing a vehicle.

source: bigpondmoney.com.au

Volkswagen recall 384,000 vehicles

German auto giant Volkswagen will recall 384,181 vehicles in China over gearbox defects after state television criticised it over the issue.

In a company statement, Volkswagen said an electronic malfunction could cause cars to lose power while being driven.

'In isolated cases, an electronic malfunction in the control unit or a lack of oil pressure inside the gearbox mechatronics may result in a power interruption,' the statement said.

Steering and braking would not be impacted, it added.

The vehicles affected include both imported models such as the Audi A3 and domestically-made ones, among them the Magotan and Passat, said the Chinese government's quality watchdog, which on Saturday had ordered the recall.

The move followed a year-long investigation, it added, and the cars involved came off the assembly line between December 2008 and early this month.

Volkswagen said it would replace components in the gearbox of affected vehicles for free.

The recall came after China Central Television alleged in an annual corporate malpractice programme that Volkswagen had used substandard gearboxes in some models, causing acceleration problems and accidents.

Volkswagen, which is Europe's biggest carmaker, said last week it planned to open seven more factories in China, the world's largest car market.

It currently has two passenger vehicle production joint ventures with China's SAIC Motor and FAW Group.

source: bigpondmoney.com.au

Jaguar Land Rover mulls manufacturing in India: report

MUMBAI, India — Jaguar Land Rover, the British luxury car unit owned by Tata Motors, is considering manufacturing vehicles from scratch in India, a report says.

Jaguar Land Rover (JLR) currently assembles some cars in India with parts shipped from Britain. Manufacturing the whole car in India would make it cheaper, as it would save on government import taxes and labour costs.

“Like Brazil, India is one of the possibilities for Jaguar Land Rover to fully manufacture cars,” a person close to the development told The Wall Street Journal on Sunday.

However, he cautioned the process was at a “very preliminary stage”.

Tata Motors officials were unavailable for comment.

JLR assembles two of its vehicles at its west India plant using kits, engines and gearboxes imported from Britain.

Sales of Jaguar and Land Rover models have been key growth drivers for Tata Motors, part of the sprawling salt-to-steel Tata Group, in recent quarters.

Indian car sales have slowed down in the last year due to high borrowing costs, costly fuel and rises in prices due to increased raw material costs.

Global auto makers such as Ford, General Motors and Nissan have invested millions of dollars in the past few years in India to use the country as a global manufacturing base, where demand for cars is higher than in the West.

Tata Motors bought Jaguar and Land Rover from Ford Motor Co in 2008 for $2.3 billion as part of plans to expand its reach beyond Asia.

The deal vaulted Tata Motors from a commercial vehicle and small-car maker into a global player with luxury brands in its range of offerings.

JLR reported record global sales of 357,773 vehicles in 2012, a 30 percent year-on-year rise, led by strong demand in China, Britain and the United States.

source: interaksyon.com

Brazil auto sales up but output down in 2012

Sao Paulo — Auto sales in Brazil rose 4.9 percent in 2012 compared with the previous year but production fell 1.5 percent, the first decline in the past 10 years, industry data showed Friday.

“In general it was a positive year although we experienced many difficulties. The sector showed major growth, undoubtedly with lower profitability but with prospects of continued growth next year,” said Cledorvino Bellini, president of the National Association of Motor Vehicle Manufacturers (ANFAVEA).

He told a press conference that sales got a boost from measures adopted by the government to stimulate sluggish economic growth, including a reduction of taxes on industrialized goods.

Brazil boasts the world’s fourth largest car market after the United States, China and Japan.

Meanwhile the Central Bank has cut its inter-bank lending rates to boost growth and consumption in this country of 194 million.

ANFAVEA said 3.8 million units were sold this year, up from 3.6 million in 2011 while production was projected to fall from 3.4 million last year to 3.3 million in 2012.

Bellini explained the decline saying Brazil’s production is for both the domestic market, which rose, and for exports, which failed to expand.

source: interaksyon.com