I don’t drive very much, can I still get a Novated Lease?
A common misconception with novated leasing is that you need to drive a minimum distance each year in order to benefit from, or qualify for, a lease. Contrary to the myths, there is no restriction to how little or much you drive to benefit from novated leasing. Whether you drive fewer than 10,000 or more than 50,000 kilometres a year, a novated lease could be a great way to finance a car. And you could save on tax.
But where did that myth come from, you ask? Let’s break it down now.
There was a time when people’s driving habits determined what the use of their vehicle was actually for. The more kilometres that you drove (greater than 40,001km per year) led to the conclusion that you were using the vehicle for business purposes and, as such, a lower statutory rate of 7% applied (that’s the percentage that a vehicle is taxed at for Fringe Benefits Tax [FBT]). Conversely, the lower kilometres you travelled (less than 15,000km) meant that you weren’t using the car for business purposes so a higher statutory rate of 26% applied. There were also two other rates in between those thresholds.
This meant that people were hit with a different rate based on their driving habits, which didn’t accurately account for what people were actually using their vehicles for. On 10 May 2011, a phasing in of a new flat 20% statutory rate commenced and as of 1 April 2014 the flat rate took full effect.
Essentially, regardless of how many kilometres you travel, the same statutory rate now applies. That means no record-keeping, no stress and just the convenience and potential tax savings a novated lease can provide.
So whether you only take your car out for grocery shop runs or road-trips from Brisbane to Perth every month… you can enjoy the benefits of novated leasing – no matter how much you drive.
This website contains general information and doesn't take your personal circumstances into account. Seek professional independent advice before making a decision.