Archive for September, 2012

Drive less and save more with a novated lease

Recent amendments to the fringe benefits tax (FBT) regime are having the intended effect of discouraging excessive driving according to statistics gathered by Smartsalary.

In the past, novated leases were subject to a sliding scale of taxation. If you drove less than 15,000 kilometres a year, you were taxed at 26%. Alternatively, if you racked up more than 40,000 kilometres a year – you were only taxed at 7%. This has the unwanted side-effect of people driving extra kilometres just to make an FBT bracket.

That changed in May 2011 when the Federal Government implemented a key recommendation of the Henry Review – a series of taxation changes proposed by Treasury Coordinator Ken Henry. Under the new rules, all drivers enjoy the same tax rate (20%) regardless of kilometres driven. This had an immediate impact on our statistics, changing the way customers use their vehicles.

Prior to May 2011, only 4% of drivers who packaged a novated lease with Smartsalary drove less than 15,000 kilometres a year (see chart above). That number quadrupled to 16% in August 2012. The changes also impacted other brackets. For example, the percentage of customers driving more than 25,000 kilometres a year has dropped significantly.

From these results we can infer that the taxation changes have not only discouraged excessive driving but have also broadened the appeal of salary packaging a novated lease to customers who drive shorter distances. This is great news for motorists and the environment.

The top 10 cars sourced by Smartsalary

More than 25,000 Smartsalary customers currently package a novated car lease. That requires sourcing hundreds of vehicles every month – an activity that gives us considerable insight into car-buying trends. One stands out in particular. There is a big discrepancy between the most popular cars among Smartsalary customers and the biggest sellers in the market. See the year-to-date sales comparison below:

Rank

Cars sourced by Smartsalary

Total Australian car sales

 1.  Mazda 3  Mazda3
 2.  Holden Cruze  Toyota HiLux
 3.  VW Golf  Toyota Corolla
 4.  Mazda CX-5  Holden Cruze
 5.  Subaru XV  Holden Commodore
 6.  Holden Captiva  Hyundai i30
 7.  Hyundai ix35  Nissan Navara
 8.  Ford Focus  Toyota Camry
 9.  Subaru Forester  Toyota Yaris
 10.  Hyundai i30  Mitsubishi Triton

As you can see, only three cars appear on both lists. Those vehicles – the Mazda3, Holden Cruze and Hyundai i30 – offer considerable “bang for your buck” and have a wide appeal that crosses demographics. But what about the other seven cars?

No doubt fleet sales skewer the total Australian car sales list towards old favourites like the Holden Commodore but we have been able to discern some other reasons for the discrepancy.

1. The prominence of utes like the Toyota HiLux and Nissan Navara on the overall bestsellers list could be attributed to the mining boom. These vehicles, while still popular with our customers, are less practical for city living.

2. Smartsalary customers love SUVs. Vehicles like the Mazda CX-5, Subaru XV, Holden Captiva and Hyundai ix35 are great value for families and hence well-suited to our customer demographic.

3. Brand is important to Smartsalary customers. The inclusion of the zippy VW Golf and heavily-promoted Ford Focus on our top 10 list shows that our customers are receptive to word-of-mouth and advertising.

4. There is only one locally-produced car in our top 10, as opposed to three on the total Australian car sales list.

Are you surprised by the differences? Do you notice any other themes? If so, leave us a comment and let us know.

Building a culture of collaboration

Chatter is an internal social media tool used at Smartsalary. Think of it as a company-wide Facebook wall. Employees can share news, plan events and even report on sales statistics – all in an informal and collaborative manner.

On June 14 I was asked to speak about the way Smartsalary has embraced Chatter at a Cloudforce conference in Sydney. Watch the video of my keynote speech below.

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Deven Billimoria
Chief Executive Officer
Smartgroup

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