If you are trying to determine whether or not you should use a novated lease FBT calculator, you will want to take the time to consider a few things before you make a decision. The first thing you should consider is whether or not you are using a statutory cost method or an employee contribution method. It will impact the amount of tax you will have to pay.
Employee contribution method
Novated leases from www.vehiclesolutions.com.au/fbt-calculated-novated-lease are a popular way for employers to reward their staff. This arrangement allows the employee to keep their car and benefit from the tax savings associated with a vehicle finance lease.
Employees eligible for a novated lease can use an FBT calculator to determine how much of their income is saved by the arrangement. It includes savings in income tax and the FBT liability resulting from the arrangement.
Calculating the monetary saving will usually exceed the amount of FBT you would have to pay on the leased car. There are two methods of calculating this. One is the Statutory Method, and the other is the Operating Cost Method.
The statutory FBT method uses the base value of the car and the statutory percentage of the days it is used privately. Similarly, the Operating Cost Method uses the total cost of operating the car over a year and the percentage of days it is used for private use.
Statutory Cost Method
For businesses that own or lease vehicles, a novated lease FBT calculator can help determine how much tax you will pay. There are two methods for calculating FBT: the operating cost method and the statutory formula method.
The statutory method applies a percentage of the car’s value to the total costs. It is easier to calculate than the operating cost method, and many businesses choose to use it. However, the result may not be entirely accurate.
Using an electronic FBT logbook means you can record your use of your vehicle more accurately. It will minimise your FBT liability, as well as your admin time. Electronic logbooks also allow you to monitor your fleet more efficiently.
A novated lease allows you to lease a car for an employee. When you use this vehicle, the FBT is calculated on the number of days you drive the vehicle during the year.
To determine how many days you can use your car privately, you must maintain a logbook. Logbooks track the number of days you use your vehicle for business purposes and the number of days you use it for private use.
In addition to the time spent driving the vehicle, other costs you should consider include fuel, maintenance, insurance, repairs, and registration. It would be best to contribute to these costs to reduce your liability.
Your FBT liability is also reduced by your employees’ contributions toward the cost of running your car. Using an electronic FBT logbook makes it easy to track the number of trips your employees make and the nature of their travel.
Despite technological advances, keeping a paper-based logbook is still a hassle. An electronic logbook can automate the entire process, saving you hours of administrative work. Consider using an electronic FBT logbook if your company is a small or medium-sized enterprise. Having an efficient fleet is crucial to the success of your business.
ECM post-tax contributions
Novated leases are a great way for employers to help their employees enjoy a vehicle while reducing the tax liability they would otherwise incur. The Australian Tax Office has recognised novated leasing as a valuable fringe benefit. However, Fringe Benefits Tax (FBT) must be paid on a novated lease.
Employee Contribution Method (ECM) is organising a novated lease to save you money on FBT. A novated lease is a contract that allows an employee to use a motor vehicle under an agreement with a third party.
ECM is a way to pay the rent for your novated lease by using your after-tax income. The taxable value of your car is determined by the “statutory formula” method, meaning that the taxable value is based on 20% of the car’s purchase price.
When you use ECM, your novated lease’s total taxable value is much lower than you would have without ECM. It means that the amount of FBT you need to pay is significantly less. You can also make post-tax contributions to your novated lease throughout the FBT year, which helps reduce your tax bill.
The ECM is not only useful for reducing FBT, but it can also improve the tax effectiveness of your salary package. For example, you can get a rebate from a supplier if you use ECM to pay for the rental of your novated lease.