The entire purpose of working for a large portion of your life is to cover your living expenses now and to save for wealth in the future. As an employee, you may be offered a number of different benefits that can help you save wealth for the future without compromising what you can own or the type of medical care you receive. If you are being offered salary sacrifice packages through work, it is important to understand how these packages can save you money on your tax bill. Find out how you can get a new car with novated leasing and lower your tax liability at the same time by reading on.
What is Salary Packaging?
Salary packaging, which is commonly referred to as salary sacrificing, is a benefits package offering by many Australian corporations that helps employees structure their existing salary into take-home pay and approved benefit items. The employee will still receive the same salary, but the employee has the right to request the employer to take money out of their salary to pay for certain expenses with pre-tax dollars. One of the many expenses that can be paid with pre-tax dollars by the employer is a car lease. If you are tired of your old car, you can now get a new car and save on your tax bill by paying for the car pre-tax with a novated lease. Why not use this novated lease calculator to get an estimate on how much you could be saving.
Your Employer is Liable to Pay the Tax
When you buy a new car, you are liable to pay taxes on the purchase. Because cars are large purchases, the tax rate can be as high as 46.5 per cent. When you choose to take advantage of salary packaging benefits, your employer pays the tax that is levied for the property or expense payments that you have included as part of your package.
Reduce Your Tax Bill in Addition to Reducing the Amount You Pay for Your Purchase
When you choose novated leasing, you do not have to worry about your employer choosing the type of vehicle you get to drive for work. You also get to use the vehicle for personal use as well as business use. But these are not the biggest benefits that novated leasing has to offer. Because the loan repayments are made with pre-tax dollars, you have not paid any tax on the money that is going to pay the car expense. Doing this also reduces your take-home pay yet at the same time it reduces the amount you pay for your vehicle to an even higher extent. When your take-home pay is lower, your tax liability will be lower. If you typically owe a tax bill, you may be able to reduce (and in some cases eliminate) how much you owe.
Novated car leasing is a great alternative to traditional finance. By sacrificing a portion of your salary, you can minimise tax and have peace of mind in knowing that your bills will be paid on-time.