Southgate Salary Packaging Services

Novated Lease Examples:

EXAMPLE 1: Novated Lease travelling 0 – 14,999kms per year

Novated Lease

0 – 14,999kms per year

Assumptions:

Gross Annual Salary: $60,000
Vehicle Base Value: $30,000 (excluding on-road costs)
Lease Term: 3 years
Annual Vehicle Lease & Operating Costs: $13,000
Travelling between 0 – 14,999kms per FBT Year (statutory percentage of 20%)

	Not Salary Packaging	Salary Packaging (with FBT)	Salary Packaging (with RCM)
Gross Salary	$60,000	$60,000	$60,000
Less
Vehicle Lease & Running Costs	$0	$13,000	$7,000
Fringe Benefits Tax	$0	$5,671	$0
GST payable on RCM	$0	$0	$545
Plus
Input Tax Credits	$0	$1,182	$1,182
Gross Salary after Packaging	$60,000	$42,421	$53,637
Less
PAYG and Medicare Levy	$11,947	$5,970	$9,783
Net Salary	$48,053	$36,451	$43,854
Less After Tax Costs
Unpackaged Vehicle - Lease & Running Costs	$13,000	$0	$0
Recipient Contribution	$0	$0	$6,000
Net Disposable Income	$35,053	$36,451	$37,854
Net Annual Savings	$0	$1,398	$2,801
Term of Lease Saving	$0	$4,194	$8,403

Travelling 0 - 14,999 kms	From 1 April 2012	From 1 April 2013	From 1 April 2014
Estimated Annual Running Costs	$13,000	$13,000	$13,000
Statutory Percentage	20%	20%	20%
Net Annual Savings	$2,801	$2,801	$2,801

Where a novated lease vehicle travels between 1 to 14,999 kilometres in an FBT Year, the distance travelled will not affect the FBT liability incurred by the vehicle (or recipient contributions required if under RCM). This is because the same statutory percentage (20%) applies to the vehicle, and therefore the vehicle has the same taxable value when travelling in this kilometre range.

EXAMPLE 2: Novated Lease travelling 15,000 – 24,999kms per year

Novated Lease

15,000 – 24,999kms per year

Assumptions:

Gross Annual Salary: $60,000
Vehicle Base Value: $30,000 (excluding on-road costs)
Lease Term: 3 years
Annual Vehicle Lease & Operating Costs: $15,000
Travelling between 15,000 – 24,999kms per FBT Year (statutory percentage of 20%)

	Not Salary Packaging	Salary Packaging (with FBT)	Salary Packaging (with RCM)
Gross Salary	$60,000	$60,000	$60,000
Less
Vehicle Lease & Running Costs	$0	$15,000	$9,000
Fringe Benefits Tax	$0	$5,671	$0
GST payable on RCM	$0	$0	$545
Plus
Input Tax Credits	$0	$1,364	$1,364
Gross Salary after Packaging	$60,000	$40,603	$51,819
Less
PAYG and Medicare Levy	$11,947	$5,352	$9,165
Net Salary	$48,053	$35,251	$42,654
Less After Tax Costs
Unpackaged Vehicle - Lease & Running Costs	$15,000	$0	$0
Recipient Contribution	$0	$0	$6,000
Net Disposable Income	$33,053	$35,251	$36,654
Net Annual Savings	$0	$2,198	$3,601
Term of Lease Saving	$0	$6,594	$10,803

Travelling 15,000 - 24,999 kms	From 1 April 2012	From 1 April 2013	From 1 April 2014
Estimated Annual Running Costs	$15,000	$15,000	$15,000
Statutory Percentage	20%	20%	20%
Net Annual Savings	$3,601	$3,601	$3,601

Where a novated lease vehicle travels between 15,000 to 24,999 kilometres in an FBT Year, the distance travelled will not affect the FBT liability incurred by the vehicle (or recipient contributions required if under RCM). This is because the same statutory percentage (20%) applies to the vehicle, and therefore the vehicle has the same taxable value when travelling in this kilometre range.

EXAMPLE 3: Novated Lease travelling 25,000 – 40,000kms per year

Novated Lease

25,000 – 40,000kms per year

Assumptions:

Gross Annual Salary: $60,000
Vehicle Base Value: $30,000 (excluding on-road costs)
Lease Term: 3 years
Annual Vehicle Lease & Operating Costs: $17,000
Travelling between 25,000 – 40,000kms per FBT Year (statutory percentage varies – see table below)

	Not Salary Packaging	Salary Packaging (with FBT)	Salary Packaging (with RCM)
Gross Salary	$60,000	$60,000	$60,000
Less
Vehicle Lease & Running Costs	$0	$17,000	$11,900
Fringe Benefits Tax	$0	$4,896	$0
GST payable on RCM	$0	$0	$464
Plus
Input Tax Credits	$0	$1,545	$1,545
Gross Salary after Packaging	$60,000	$39,649	$49,181
Less
PAYG and Medicare Levy	$11,947	$5,028	$8,269
Net Salary	$48,053	$34,621	$40,912
Less After Tax Costs
Unpackaged Vehicle - Lease & Running Costs	$17,000	$0	$0
Recipient Contribution	$0	$0	$5,100
Net Disposable Income	$31,053	$34,621	$35,812
Net Annual Savings	$0	$3,568	$4,759
Term of Lease Saving	$0	$10,704	$14,277

Travelling 25,000 - 40,000 kms	From 1 April 2012	From 1 April 2013	From 1 April 2014
Estimated Annual Running Costs	$17,000	$17,000	$17,000
Statutory Percentage	17%	20%	20%
Net Annual Savings	$4,759	$4,400	$4,400

Where a novated lease vehicle travels between 25,000 to 40,000 kilometres in an FBT Year, the distance travelled will impact the FBT liability incurred by the vehicle (or recipient contributions required if under RCM). The statutory percentage used to calculate the vehicle's taxable value, and hence used to calculate the required post-tax recipient contributions, will change each new FBT Year during the lease period up to 1^st April 2013 (as per table above).

EXAMPLE 4: Novated Lease travelling 40,001kms or more per year

Novated Lease

40,001kms or more per year

Assumptions:

Gross Annual Salary: $60,000
Vehicle Base Value: $30,000 (excluding on-road costs)
Lease Term: 3 years
Annual Vehicle Lease & Operating Costs: $19,000
Travelling 40,001kms or more per FBT Year (statutory percentage varies – see table below)

	Not Salary Packaging	Salary Packaging (with FBT)	Salary Packaging (with RCM)
Gross Salary	$60,000	$60,000	$60,000
Less
Vehicle Lease & Running Costs	$0	$19,000	$15,100
Fringe Benefits Tax	$0	$3,744	$0
GST payable on RCM	$0	$0	$354
Plus
Input Tax Credits	$0	$1,727	$1,727
Gross Salary after Packaging	$60,000	$38,983	$46,273
Less
PAYG and Medicare Levy	$11,947	$4,801	$7,280
Net Salary	$48,053	$34,182	$38,993
Less After Tax Costs
Unpackaged Vehicle - Lease & Running Costs	$19,000	$0	$0
Recipient Contribution	$0	$0	$3,900
Net Disposable Income	$29,053	$34,182	$35,093
Net Annual Savings	$0	$5,129	$6,040
Term of Lease Saving	$0	$15,387	$18,120

Travelling 40,001kms or more	From 1 April 2012	From 1 April 2013	From 1 April 2014
Estimated Annual Running Costs	$19,000	$19,000	$19,000
Statutory Percentage	13%	17%	20%
Net Annual Savings	$6,040	$5,560	$5,200

Where a novated lease vehicle travels 40,001 kilometres or more in an FBT Year, the distance travelled will impact the FBT liability incurred by the vehicle (or recipient contributions required if under RCM). The statutory percentage used to calculate the vehicle's taxable value, and hence used to calculate the required post-tax recipient contributions, will change each new FBT Year during the lease period up to 1^st April 2014 (as per table above).

Other Examples:

EXAMPLE 5: Portable Electronic Device (eg. PDAs, electronic diaries, iPads)

Portable Electronic Device*

(Over 50% business use)

Assumptions:

Gross Annual Salary: $60,000
Laptop Cost: $2,200 including GST

*Greater than 50% business use is required to salary package this benefit as FBT exempt.

	Not Salary Packaging	Salary Packaging
Gross Salary	$60,000	$60,000
Less
Portable Electronic Device	$0	$2,200
Fringe Benefits Tax	$0	$0
Plus
Input Tax Credits	$0	$200
Gross Salary after Packaging	$60,000	$58,000
Less
PAYG and Medicare Levy	$11,947	$11,267
Net Salary	$48,053	$46,733
Less After Tax Costs
Portable Electronic Device	$2,200	$0
Net Disposable Income	$45,853	$46,733
Net Annual Savings	$0	$880

Effective Cost = $2,200 - $880 tax saving = $1,320 (equivalent to 40% price discount)

The table below shows the Income Tax savings you can achieve when purchasing a Portable Electronic Device at various prices, for each Income Tax bracket.

Income Range	$18,201 - $37,000	$37,001 - $80,000	$80,001 - $180,000	More than $180,000
Annual Expense	Tax Savings	Tax Savings	Tax Savings	Tax Savings
$1,100	$305	$440	$485	$565
$2,200	$610	$880	$970	$1,130
$3,300	$915	$1,320	$1,455	$1,695
$4,400	$1,220	$1,760	$1,940	$2,260
$5,500	$1,525	$2,200	$2,425	$2,825

EXAMPLE 6: Otherwise Deductible (work and income related expenses)

Otherwise Deductible*

Assumptions:

Gross Annual Salary: $60,000
Otherwise Deductible Expense: $5,000

*A work or income related expense, which could otherwise be claimed on your Income Tax return at the end of the financial year.

	Not Salary Packaging	Salary Packaging
Gross Salary	$60,000	$60,000
Less
Otherwise Deductible Expense	$0	$5,000
Fringe Benefits Tax	$0	$0
Plus
Input Tax Credits	$0	$0
Gross Salary after Packaging	$60,000	$55,000
Less
PAYG and Medicare Levy	$11,947	$10,247
Net Salary	$48,053	$44,753
Less After Tax Costs
Otherwise Deductible Expense	$5,000	$0
Net Disposable Income	$43,053	$44,753
Net Annual Savings	$0	$1,700

The table below shows the Income Tax savings you can achieve when salary packaging Otherwise Deductible expenses at various prices, for each Income Tax bracket.

Income Range	$18,201 - $37,000	$37,001 - $80,000	$80,001 - $180,000	More than $180,000
Annual Expense	Tax Savings	Tax Savings	Tax Savings	Tax Savings
$1,000	$205	$340	$385	$465
$2,000	$410	$680	$770	$930
$3,000	$615	$1,020	$1,155	$1,395
$4,000	$820	$1,360	$1,540	$1,860
$5,000	$1,025	$1,700	$1,925	$2,325
$6,000	$1,230	$2,040	$2,310	$2,790
$7,000	$1,435	$2,380	$2,695	$3,255
$8,000	$1,640	$2,720	$3,080	$3,720
$9,000	$1,845	$3,060	$3,465	$4,185
$10,000	$2,050	$3,400	$3,850	$4,650

Please note: The examples above assume that no Input Tax Credits (ITCs) are available on the Otherwise Deductible benefit salary packaged – additional savings may be achieved for some Otherwise Deductible expenses where ITCs apply.

DISCLAIMER: The information in the examples above is for illustrative purposes only and the examples are of a general nature only. They do not take into consideration your personal circumstances. The calculations in the examples given are based on Income Tax rates for the 2012-2013 Financial Year as at July 2012. They assume that the employer is eligible to claim back the GST and returns it to the employee’s package and that the employee is claiming the tax-free threshold and has no other incomes/deductions. The benefits that may be achieved by salary packaging will vary depending on your employment situation, your employer’s salary packaging policy and your chosen fringe benefits. Southgate Salary Packaging Services does not provide any advice on the financial, taxation or welfare recipient benefit impacts relating to salary packaging. You should seek independent professional advice on how salary packaging may impact your individual financial, taxation and welfare benefit circumstances before proceeding with salary packaging.

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