Salary sacrificing and novated leasing

Posted: 21/02/2012 By: Rory Deegan

Salary sacrificing and novated leasing

Salary sacrificing or salary packaging simply means sacrificing a portion of your pre-tax salary in order to pay for one or many approved items. The approval of these items, of which a novated lease is one, is decided upon by the Australian Tax Office. Salary sacrificing is seen simply as a mechanism which offers tax paying workers a way of buying selected items and services while reducing their taxable income. Almost all Australian workers are entitled to some or all forms of salary sacrificing. The practice is not as widespread as most would expect however it is the most popular way of reducing your tax liability.

How does novated lease work within Salary Sacrificing

A novated lease is simply a way of buying a vehicle through salary sacrificing. While novated leases are a more complex purchase than some other salary packaging items the principle remains the same. With Novated by fleetcare vehicle expenses are included in the amount which comes out of your salary each pay cycle. All running costs from the repayments for the vehicle finance to the smaller weekly petrol fill up are included thus maximising the amount which would otherwise be taxed at the full rate. This works out extremely well when you remember that these costs would need to be paid irrespective of how you choose to acquire your vehicle.

Why doesn’t everyone do this?

We can’t understand why more people don’t go with the process. Through our work with our customers over the years we have noted all the most common reasons for not salary sacrificing. It seems that the most popular three are “whats salary sacrificing?”, “its too complicated” and “I didn’t know I could”. For more on the frequently asked questions on this please see our FAQ page.

Summary

As a tax paying Australian resident you are entitled to make the most of the tax tools on offer. Buying a car which is a step up from your old car is a point of pride for all Australians and as such you should feel proud that you are getting your new car at the right price with the right terms. Salary sacrificing with a Novated Lease is all the sweeter when you can drive safe in the knowledge that your paying for it in the most efficient way.

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