In an era where sustainability intersects with innovation, novated leasing emerges as a beacon for both environmentally-conscious drivers and savvy savers. As electric vehicles (EVs) gain traction, the spotlight turns towards financial mechanisms that not only promote green mobility but also offer tangible fiscal advantages to the average consumer. Among these, novated leasing stands out, providing a pathway to EV ownership that is both tax-efficient and cost-effective.
Novated leasing is a tripartite agreement involving an employee, their employer, and a leasing company, allowing employees to lease an EV through pre-tax salary deductions. This arrangement not only facilitates access to newer, more efficient vehicle models but also offers a suite of tax benefits that can lead to significant savings.
Tax Benefits Unpacked
The cornerstone of novated leasing’s appeal lies in its tax advantages. By structuring vehicle payments through pre-tax income, employees can lower their taxable income, resulting in potential tax savings. Furthermore, Goods and Services Tax (GST) on the purchase price of the vehicle and ongoing costs, such as fuel and maintenance, can be avoided, as these expenses are covered by the pre-tax salary.
Adding a crucial update to the narrative of novated leasing’s appeal, it’s imperative to spotlight a significant policy shift that further sweetens the deal for prospective EV and PHEV owners. As of July 2022, a landmark policy exemption has come into effect, stipulating that electric vehicles (EVs), plugin hybrid electric vehicles (PHEVs) and fuel cell electric vehicles (PHEV), that are acquired under a novated lease, are not subject to Fringe Benefits Tax (FBT). This exemption, aimed at accelerating the transition to sustainable transportation, represents a substantial financial incentive for individuals considering an EV.
To qualify for the FBT exemption, the first time the car is both held and used is on or after 1 July 2022 and the cost of the vehicle is less than $89,332, which is the luxury fuel tax threshold for low carbon vehicle. Important, second hand cars can also be novated and be FBT-free so long as they adhere to both the above criteria.
Additionally, novated leases often come with operational benefits, including electricy, maintenance, and insurance, which are bundled into the lease. This not only simplifies the management of vehicle-related expenses but also provides further financial relief through bulk purchasing and administrative efficiencies.
Savings Scenario
The savings potential of novated leasing can vary based on several factors, including the vehicle’s value, lease term, and the lessee’s tax bracket. However, industry analyses suggest that the average salary earner can expect to save thousands over the term of their lease compared to traditional car ownership. For instance, on a mid-range EV with a novated lease term of three years, savings can range from $3,000 to $5,000 per annum, depending on individual tax circumstances and the specific terms of the lease agreement.
These savings are not only a product of tax efficiencies but also stem from the comprehensive approach to vehicle management that novated leasing offers. The inclusion of running costs in the lease agreement allows for predictable budgeting, with the added benefit of potentially lower operational expenses thanks to the fuel efficiency and reduced maintenance requirements of EVs.
What makes WhipSmart different
WhipSmart takes a customer first approach to novated leasing. We put the customers best interests first and ensure it’s a good option as each person’s circumstances are different. We are also completely transparent about the actual cost involved in a novated lease and take the time to clearly explain all the costs that a customer can expect over the life of the lease. In addition, our online customer portal provides 24/7 access to all the information relating to a lease and ensures that there’s no confusion about what’s included and the funds available. WhipSmart’s aim is to make buying, owning and upgrading a car as easy as it is to do with a mobile phone. As the smarter way to own an EV, make sure to speak to WhipSmart before you buy within anyone else.
The Road Ahead
As governments and corporations increasingly incentivize EV adoption to meet sustainability targets, novated leasing presents a financially viable and environmentally responsible choice for individuals. By leveraging the tax benefits and operational conveniences of novated leasing, the average person can contribute to a greener future while navigating the path to EV ownership with financial savvy.
The journey towards sustainable mobility is paved with innovative financial solutions. Novated leasing not only underscores the shift towards greener transportation options but also highlights the symbiotic relationship between environmental stewardship and economic incentive. As more consumers explore the benefits of novated leasing, the prospect of driving an EV becomes not just a dream for the future, but a tangible reality with clear fiscal benefits.