Archive for the 'Novated Leases' Category

Celebrating 60,000 Smartleases

Celebrating 60,000 Smartleases winner

“This is my first novated lease. I had no idea that I was even in the running to win so it was a huge surprise when I found out!” Winner Zane Kerr, and Glen and Shamim from Smartleasing.

Early this year we clocked up our 60,000th car lease; that’s the equivalent of 15 cars leased every singe day since Smartleasing began in 2004. You can’t imagine how proud that makes me feel.

We’ve never been shy about celebrating our successes so we put together a $60,000 prize pool and invited new and existing customers to stake their claim … over the next three months, everyone who took out a novated car lease was entered into the prize draw that included daily giveaways of movie tickets, coffee machines and Caltex fuel cards.

The grand prize winner was Zane Kerr from NSW Pathology, who won $20,000 in cash and prizes.  Congratulations, Zane . . . as your Smartleasing consultant Glen Doyle said, he couldn’t imagine the prize going to a nicer guy!

Big thanks to our partners – Macquarie Group, Avea, MotorOne, Caltex, St George Bank and QBE – for contributing to the celebrations, and of course to the Smartleasing team who do a great job looking after our customers.

The great news is we’re doing it again for Christmas! If you’re considering a novated lease, I encourage you to get onto the Smartleasing website and request a quote. And if you go ahead and Smartlease a car this month, you’ll be in the running to win $20,000 cash, just in time for Christmas!

No doubt, an extra $20k in the bank would be a great way to celebrate the end of the year . . . so good luck!

Post-Election Business Update

As you may have heard, the novated leasing industry was impacted by the proposed Fringe Benefits Tax (FBT) changes in July.  I’m pleased to announce that as at the Monday after the election our business had fully recovered and we are essentially back to business as usual.

We are grateful for the support of our loyal clients, all of whom trusted in our logic to continue to offer novated leasing to their staff despite the legislative uncertainty that existed prior to the election.

I suspect their confidence in Smartsalary comes from the fantastic service provided by our engaged staff, who have remained positive throughout!  You see, we decided to retain all of our staff through the recent uncertain times, and they reciprocated by working collaboratively across teams to ensure high service levels.

In addition, we commenced recruitment for a further 20 roles to position ourselves for future growth.  We are pleased to have received almost 1000 resumes for vacancies across the business.   If you are interested in finding out more, take a look at our careers page: http://smartgroup.com.au/current-opportunities

I am personally  very optimistic about the future of the business.  And I wish to extend a heartfelt thank you to our incredibly loyal clients and wonderfully engaged staff.

Feel  free to comment below or tweet me @DevenBillimoria

2013/14 Federal Budget: Video blog

This week Treasurer Wayne Swan delivered the 2013/14 Federal Budget in Canberra, and as always, here’s our annual post-budget review with Senior Tax Adviser Simon Ellis!

 

Additional Changes

In addition to the changes outlined in the above video it is worth noting that the 0.5% increase in the effective tax rate for all employees – i.e. the increase in the Medicare levy – will actually slightly increase the after-tax savings achieved through salary packaging.  For every $1,000 in benefit costs an employee salary packages (i.e. pays for with pre-tax salary) they will now save an additional $5.

As well as this the budget announced that the FBT rate will increase to 47% from 1 April 2014 and this will mean the FBT-gross up rates also change from that date as follows:

  • Type 1: moves from 2.0647 to 2.0802
  • Type 2: moves from 1.8692 to 1.8868

As a result of these changes employees in the not-for-profit and public hospital sectors will see a small reduction in their threshold (or “cap”) benefit as follows:

  • The annual amount a Public Hospital employee is able to package under this benefit will decrease from $9,095 to $9,010, and
  • The annual amount a PBI employee is able to package under this benefit will decrease from $16,050 to $15,900

The impact of the reduced limit will, however, be largely offset by the increase in salary packaging savings flowing from the higher Medicare rate

Timeframes

Employers and employees should note the following timetable for implementation of the salary packaging changes noted in this post:

Changes applying from 1 July 2013
  • Increase of the superannuation concessional cap to $35,000 p.a. for individuals aged 60 and over
  • Increase in the Superannuation Guarantee rate from 9% to 9.25%
Changes applying from 1 April 2014
  • Transition period for novated lease benefits ends: all salary packaging employees move to the flat 20% statutory rate (i.e. no more km travel)
  • Transition period for in-house fringe benefits ends: no more packaging of this benefit can occur
  • New FBT rate of 47% applies and threshold limits for NFP employers change
Changes applying from 1 July 2014
  • Increase of the superannuation concessional cap to $35,000 p.a. for individuals aged 50 and over
  • Cap of $2,000 will be applied to salary packaging of self-education expenses
  • Increase in the personal medicare levy from 1.5% to 2%.

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.

2012-13 Federal Budget Analysis: Video

Watch our video analysis of the 2012-13 Federal Budget. Simon Ellis, our Senior Tax Specialist, outlines his thoughts on the budget and how they will impact salary packaging.  A written summary can also be found here.

Leave a comment here.

Novated Leases: 8 months on from the 2011/12 Federal Budget Changes

Hi Readers – Simon Ellis here guest posting about the 2011/2012 novated lease budget changes.

It’s been just over eight months since the 2011/12 budget changes were implemented and now that the dust has settled we thought it would be a good time to review the new landscape for salary packaged cars.

Following the budget changes there are now 2 types of packaged vehicles in Australia:

  1. Vehicles leased before the 2011/12 Budget; and
  2. Vehicles leased after the 2011/12 Budget.

All vehicles can still use the Statutory Formula FBT valuation method – where the tax payable on the car is calculated as a % of its purchase cost – however the Statutory Formula percentages are now different depending on whether the pre-Budget or post-Budget rules apply.

Each of the above vehicle types is examined in more detail below.

Vehicles leased before the 2011/12 Budget

Novated leases that commenced on or before 10 May 2011 are, in most cases, valued for FBT purposes using the ‘old’ Statutory Formula rates:

Kilometres Travelled

All Years

0 – 14,999km

26%

15,000 – 24,999km

20%

25,000 – 39,999km

11%

40,000km +

7%

Unsurprisingly, packaging activities for employees with a pre-Budget lease remain largely unchanged. In particular, annual km targets are still relevant: low km drivers are penalised by a high (i.e. 26%) valuation rate, while high km drivers are still able to access very attractive low rates.

It is equally important to note that an exception applies to pre-budget cars for which a “commitment event” has occurred post-budget. “Commitment events” result in a vehicle moving from the old Statutory Formula rates to the new rates (discussed in the next section below) as per the following table:

Commitment event

Application of ‘new’ rates

Lease is refinanced Post-budget rates will apply from 1 April following refinance date.
Employee changes employment Post-budget rates will apply from employment change date.

Most drivers holding a pre-Budget car are happy with the old FBT rates, but it is worth noting to those who see an advantage in the new rates that deliberately bringing about a Commitment Event could be seen as tax avoidance by the ATO.

Vehicles leased after the 2011/12 Budget

Novated leases that commenced after 10 May 2011 (or have had a post-Budget commitment event) are valued for FBT purposes using the ‘new’ Statutory Formula rates:

Kilometres Travelled

FBT Year Ending

31/3/2012

31/3/2013

31/3/2014

31/3/2015

0 – 24,999km

20%

20%

20%

20%

25,000 – 39,999km

14%

17%

20%

20%

40,000km +

10%

13%

17%

20%

While the new rates have seen high-km drivers lose a portion of their tax benefit, they’ve also delivered a big win to ordinary drivers who can now lock in great tax savings regardless of kilometres travelled. Packaging employees are no longer penalised if annual kms fall below 15,000!

As predicted, this change has seen a big jump in vehicle packaging amongst ordinary Australian drivers: our leasing team has seen a 150% increase in the number of drivers with low annual kms taking up a novated lease!

To better understand this change we modeled the tax savings across different kilometre bands at two salary levels: $45,000 and $95,000. Our modeling showed the following annual saving results for the 2012 year:

Annual Tax Savings at $45,000 Salary

Annual Kilometres Travelled

Pre-Budget

Post-Budget

% Change

14,500 km

$2,740

$3,356

22%

21,000 km

$3,583

$3,583

0%

30,000 km

$4,548

$4,331

-5%

Annual Tax Savings at $95,000 Salary

Annual Kilometres Travelled

Pre-Budget

Post-Budget

% Change

14,500 km

$3,248

$4,050

25%

21,000 km

$4,470

$4,470

0%

30,000 km

$6,254

$5,853

-6%

To summarise, under the new rules we have seen:

  • a 20-30% increase in the savings available to low-km drivers;
  • no change in the savings available to mid-km drivers; and
  • a 5-10% decrease in the tax savings currently* available to high-km drivers.

*Note that our modeling is for current-year packaging only. Savings for high km drivers will decrease further over the next three years to be more in line with those available to mid-low km drivers.

So, overall there have been a lot more winners than losers from the Budget changes, with low-km drivers seeing a big increase in their tax savings while high-km drivers are seeing only a modest reduction in theirs.

And the most important result: thousands of dollars in tax savings remain available to everyone!

Remember – if you want to see what sort of savings you could achieve through a novated lease then visit our Smartleasing website and have a play around with the Novated lease Calculator.

Leave a comment here.


Deven Billimoria
Chief Executive Officer
Smartgroup

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