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Breaking News: Kevin Rudd announces changes to FBT affecting Novated Lease Calculations for Motor Vehicles

Posted on: July 16, 2013 by Platinum Direct

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In breaking news Prime Minister Kevin Rudd today has abolished the use of the statutory formula for salary sacrificed motor vehicles leaving car owners searching for a Novated Lease alternative. The changes to the formula will come into effect from next FBT (Fringe Benefit Tax) year, commencing April 1, 2014 for any contract entered into from today.

The change will directly impact the future decisions of the 320,000 people who currently salary sacrifice a motor vehicle through a novated lease using the statutory method. It will also impact organisations who provide company cars to employees and utilise the statutory method.

The alternative method of calculating FBT, the operating cost method remains unaffected by the announcement. The operating cost method relies on the business usage of the vehicle to calculate the Fringe Benefit Tax liability.

What does this mean for you?

If you have an existing novated lease under the statutory method the proposed changes will not impact your existing novated lease arrangement. The only exceptions is if a variation is made, for example you re-novate the lease through a new employer.

If you have a reasonable level of business usage a novated lease will still provide an excellent means of obtaining significant levels of GST and income tax advantage.

If you have a high proportion of personal usage, a novated lease may now not be the most cost effective method of financing a motor vehicle. In these circumstances a secured car loan in most instances will be the best alternative. Using a Finance Broker, such as Platinum Direct Finance can offer you a range of options from across the car finance market.

The Leader of the Opposition, Tony Abbott is yet to respond to the changes in Novated Lease policy

For more information call us today or email info@platinumdirectfinance.com.au

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