Packaged Car Lease
Instead of buying your next car outright, you may be able to lease the car and pay all your running costs through your salary package.
Whilst salary packaging does attract fringe benefits tax (FBT), the further you drive each year the less FBT you have to pay. Also, by paying some costs yourself, you can reduce your FBT liability.
Let's consider John and Jill, each on a salary package of $45,000 pa. They each buy a $30,000 car, John through a personal loan and Jill through a packaged lease. Each drives about 30,000 km pa.
After paying for all car expenses, Jill's packaged car lease gives her nearly $3,000 more in after-tax, take-home pay (see table below).
| The car packaging difference* |
John Not packaged $ |
Jill packaged $
|
| Gross salary package |
45,000 |
45,000 |
| Total lease and running costs |
- |
- 12,570 |
| Employee contribution |
- |
+ 3,300 |
| FBT |
Nil |
Nil |
| Taxable salary |
45,000 |
35,730 |
| Income tax on salary |
- 10,347 |
- 7,427 |
| After-tax salary |
34,653 |
28,303 |
| After-tax car cost |
- 12,570 |
- 3,300 |
| Net take-home pay |
22,083 |
25,003 |
*Above table is an illustration only.
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