Labor Electric Car FBT discount

[Jusebert]

Thinking it might be safer to lease for 4 years and then extend. I can't see anywhere that if you did a 5 year lease and they decide they will remove the benefits after their review that your lease won't then attract FBT. If anyone else see's that anywhere I'll be interested to know.

 

[skyworxx]

I talked to my accountant and it looks like a novated lease is still the best option, even if I am the director of my company.
Reasoning is that if I want the car to be eventually privately owned by me, I'd have to buy it from the company at the market value at the time, which is probably not significantly reducing over the next 3 years (and in fact has already gone up since I ordered my Model Y SR).
I'd also have to charge GST on the sale, which could be higher than the GST I get as credit when the company buys the car because of the car limit of about AUD64k.

 

[M@dman]

Thinking it might be safer to lease for 4 years and then extend. I can't see anywhere that if you did a 5 year lease and they decide they will remove the benefits after their review that your lease won't then attract FBT. If anyone else see's that anywhere I'll be interested to know.

I agree it is sensible to assume that the FBT exemption will end by design and would apply regardless of individual lease terms. When GST was introduced it applied to existing leases.

 

[Speedst3r]

Treasury Laws Amendment (Electric Car Discount) Bill 2022

Helpful information Text of bill First reading: Text of the bill as introduced into the Parliament Third reading: Prepared if the bill is amended by the house in which it was introduced. This version of the bill is then considered by the second house. As passed by

www.aph.gov.au

The legislation has been referred to a Senate committee that isn't due to report back until late September. I've asked my NL company for a regular quote and what happens should an FBT exemption come into force on 1 October or 1 January. Might mean the 3 will be cancelled

 

[M@dman]

Treasury Laws Amendment (Electric Car Discount) Bill 2022

Helpful information Text of bill First reading: Text of the bill as introduced into the Parliament Third reading: Prepared if the bill is amended by the house in which it was introduced. This version of the bill is then considered by the second house. As passed by

www.aph.gov.au

The legislation has been referred to a Senate committee that isn't due to report back until late September. I've asked my NL company for a regular quote and what happens should an FBT exemption come into force on 1 October or 1 January. Might mean the 3 will be cancelled

Damn. The idea was recommended by a senate committee a couple of years ago iirc..

 

[Matt3112]

So I have a question, if the law isn’t past till late September, what are people planning on doing in the mean time? My EDD is end of august, and wandering what options I have? My lease company said to put 80% work related kms and keep a log book, under the assumption it gets past then they revert to 100% payments pre tax and 0% FBT. Just wandering is there a better option? Noting that this will cost an extra $50 a week ($252 to $301/week)

 

[M@dman]

So I have a question, if the law isn’t past till late September, what are people planning on doing in the mean time? My EDD is end of august, and wandering what options I have? My lease company said to put 80% work related kms and keep a log book, under the assumption it gets past then they revert to 100% payments pre tax and 0% FBT. Just wandering is there a better option? Noting that this will cost an extra $50 a week ($252 to $301/week)

I will get some advice, but my plan is to keep it simple and start with all pre-tax and if for some reason the exemption doesn't go ahead I will fix it up in time to meet my FBT obligations (that is - if I have created an FBT liability I will organise to pay it using whatever method makes most sense). I don't have an HR department to tell me that can't be done. The way things are going for my January 30 order it won't be here until September at the earliest anyway.

 

[Matt3112]

I will get some advice, but my plan is to keep it simple and start with all pre-tax and if for some reason the exemption doesn't go ahead I will fix it up in time to meet my FBT obligations (that is - if I have created an FBT liability I will organise to pay it using whatever method makes most sense). I don't have an HR department to tell me that can't be done. The way things are going for my January 30 order it won't be here until September at the earliest anyway.

I asked this from my novated lease company, and they said it wasn’t possible to o 100% pre tax unless it was a specific type of vehicle like a van etc. I also been advised a logbook is required which is a pain in the ass

 

[M@dman]

I asked this from my novated lease company, and they said it wasn’t possible to o 100% pre tax unless it was a specific type of vehicle like a van etc. I also been advised a logbook is required which is a pain in the ass

I would get some financial/tax advice. The lease company just takes the payments no matter where and how they are generated, and the packaging company is just a postbox. People like to say ‘you can’t do that’ a lot. When I have changed jobs I have made payments on a lease from my own pocket and the lease and packaging company didn’t care where the money came from. It’s more likely a question for your employer/yourself and what’s acceptable within the tax rules.

 

[Jusebert]

The legislation has been referred to a Senate committee that isn't due to report back until late September. I've asked my NL company for a regular quote and what happens should an FBT exemption come into force on 1 October or 1 January. Might mean the 3 will be cancelled

That's disappointing... If they don't come back before that date it has no chance of being passed until the earliest October 26 / 27...

 

[skyworxx]

Can anyone recommend a leasing company which is willing to quote a novated lease without ECM (and ideally is easy to work with as a small business)?

It will create a FBT liability for the employer (which is also me), but as long as the legislation gets royal ascent before 31/3, this should all just work out.

 

[Blaq]

Can anyone recommend a leasing company which is willing to quote a novated lease without ECM (and ideally is easy to work with as a small business)?

It will create a FBT liability for the employer (which is also me), but as long as the legislation gets royal ascent before 31/3, this should all just work out.

What's ECM?.... edit: Found it (Employee Contribution Method)
I'm in the same boat, wasn't sure you could do a novated lease without being a medium to large size entity. I'm a one person company too and am planning to take a company loan. Let us know if you can fine a leasing company to take you on.

 

[skyworxx]

Ya, the idea is that I as an employee of my company would not contribute post-tax, therefore incurring FBT for the company. Looks like most/all leasing companies aren't offering this (at least outright on their website), because an employer would have had to be extremely generous to agree to this.

I am still wrapping my head around all of this.

 

[DavidFH]

Treasury Laws Amendment (Electric Car Discount) Bill 2022

Helpful information Text of bill First reading: Text of the bill as introduced into the Parliament Third reading: Prepared if the bill is amended by the house in which it was introduced. This version of the bill is then considered by the second house. As passed by

www.aph.gov.au

The legislation has been referred to a Senate committee that isn't due to report back until late September. I've asked my NL company for a regular quote and what happens should an FBT exemption come into force on 1 October or 1 January. Might mean the 3 will be cancelled

I'm in the same boat, though I do at least have direct finance arranged as backup.

It's worth exploring other options to hedge the risk the bill doesn't pass or a M3 becomes ineligible when it does. I've done my own calcs and personally it still works out a good deal to start on finance and then break it after a few months then do a sale and leaseback to get into a novated lease. There is an extra cost of doing so vs just trusting the legislation will pass, but if you go with a lease and it doesn't that's going to cost more than a direct finance.

The difference between an immediate 0% FBT Novated Lease, and the option above to delay starting one after delivery is less than the cost of the acceleration boost (and that includes the lost GST savings, break costs, fee estimates etc.). If the bill doesn't pass or is changed then it could cost me over 5k more to do a Novated lease vs direct finance and I would be much more locked in.

As always, this is specific to my circumstances. If you don't know enough to do your own calculations then engage a tax accountant or financial advisor.

 

[DavidFH]

Ya, the idea is that I as an employee of my company would not contribute post-tax, therefore incurring FBT for the company. Looks like most/all leasing companies aren't offering this (at least outright on their website), because an employer would have had to be extremely generous to agree to this.

I am still wrapping my head around all of this.

Some employers might allow it then pass the cost on to the employee, and you could do it for an owner managed business. But the FBT costs are huge, it likely outweighs any benefit (the ATO have a calculator for the liability Calculators and tools).

 

[skyworxx]

Some employers might allow it then pass the cost on to the employee, and you could do it for an owner managed business. But the FBT costs are huge, it likely outweighs any benefit (the ATO have a calculator for the liability Calculators and tools).

I am aware. It would be roughly $13.000 annually or about $8000 if I received the car September 1st. But the hope/gamble is that the legislation passes before the end of the FBT year.

If the legislation doesn't get passed, I would have to pay that FBT and sell the car to myself, also having to charge GST at the full sales price based on market value, while only getting a GST refund on the initial purchase of roughly $6000 (car limit). Probably a net loss of about $10.000 worst case.

 

[AndrewSa]

I assume it doesn't matter when the legislation passes as it will be back dated to July 1. So biggest issue for me is how the lease company will commence the nov lease and then convert it with probably some repayment... I've asked NL company 3 times but not got an answer but maybe its more a question for the employer as they're the ones holding the fbt burden. My employer went ECM to offset FBT completely therefore simplify it for them I'm thinking... Anyway my car will be here late August so I'll need to start a lease and somehow it'll all work out... here's hoping ...

 

[evbee]

Yep this is an aspect of the law I’m interested in too. Would seem unfair that it would change established leases, rather than just applying to new ones at the three year mark, but

I'm guessing the exemption will apply for the duration of the lease.

 

[Jusebert]

I'm guessing the exemption will apply for the duration of the lease.

That would make sense to me as well - but I'll be asking the question for sure before signing up to anything greater than the review period

 

[Matt3112]

I'm in the same boat, though I do at least have direct finance arranged as backup.

It's worth exploring other options to hedge the risk the bill doesn't pass or a M3 becomes ineligible when it does. I've done my own calcs and personally it still works out a good deal to start on finance and then break it after a few months then do a sale and leaseback to get into a novated lease. There is an extra cost of doing so vs just trusting the legislation will pass, but if you go with a lease and it doesn't that's going to cost more than a direct finance.

The difference between an immediate 0% FBT Novated Lease, and the option above to delay starting one after delivery is less than the cost of the acceleration boost (and that includes the lost GST savings, break costs, fee estimates etc.). If the bill doesn't pass or is changed then it could cost me over 5k more to do a Novated lease vs direct finance and I would be much more locked in.

As always, this is specific to my circumstances. If you don't know enough to do your own calculations then engage a tax accountant or financial advisor.

If you initially purchase the car through finance, then resell to a leasing company, wouldn't you lose the GST benefit?