If you’re an independent professional who is planning to buy a car or at least contemplating it, then you ought to consider Novated Leasing. Why? Well, it’s an easy, cost effective way to pay for your car and allows you to reduce your income tax and GST. Whether you choose to purchase a brand new car, a used car or even salary sacrifice your existing vehicle, novated leasing allows payments to be taken from pre-tax salary deductions. This results in reducing your taxable income, which of course means that you pay less tax. What’s not to like? Read on to see how you can benefit from this lucrative option and how it actually works.
Am I eligible?
If you are an Australian contractor operating on a PAYG engagement structure (ie. not a Pty Ltd), then you are eligible to apply for a Novated Lease through Entity Solutions.
How will I benefit?
- Reduced income tax, GST savings on vehicle purchase price and GST savings on running cost expenses
- Fixed deductions each pay period, regardless of actual expenses incurred from day to day
- Full visibility of all deductions, costs and balances via your own personalised online account
- You can save anywhere from $2,000 to $5,000 each year.
How does it work?
Entity Solutions works with our affiliate partner, Enlist, to offer this novated leasing service. A fixed deduction is withheld from your salary each pay cycle. All daily running costs are paid by us and Enlist, with the difference between fixed deductions and actual expenses reconciled back to you at the end of the lease. The claimable running costs as defined by the Australian Taxation Office (ATO) include: registration of the car, insurance of the car, fuel and oil, car repairs and car maintenance.
We’ll do all the hard work for you by setting up your salary packaging on a new or existing car. Please note that some conditions do apply, so you’ll need to give us a call to talk through your specific circumstances.
Regardless of income level, getting the most out of your pre-tax income is essential for all IPros. A smart way to capitalise on your earnings is by purchasing a car through Novated Leasing, so don’t hesitate to contact us with your vehicle requirements. We’ll supply a range of options available to you, and you’ll be one step closer to enjoying a car with the knowledge that you’re offsetting your tax.
Want a better idea of how you can save money with Novated Leasing? In the below scenario, Robert is an independent professional who earns a yearly income of approximately $70,000 and takes up a novated lease. The vehicle price was $25,000 (inc. GST), and he is leasing on a 4 year term at 20,000 km per annum. He will benefit from a saving of $2,402 per year.