Novated Lease Information Kit

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					Flexitech Group Pty Ltd

Novated Lease Information Kit

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INDEX
INTRODUCTION .................................................................................................................................. 3 BACKGROUND .................................................................................................................................... 3 WHAT IS A NOVATED MOTOR VEHICLE LEASE? .......................................................................... 5
SUMMARY OF NOVATED LEASE BENEFITS .................................................................................................5 ANALYSING THE FINANCIAL BENEFITS OF A LEASED MOTOR VEHICLE USING OUR NOVATED LEASE ...............................................................................................................................................................6 NOVATED LEASE SIMULATOR .......................................................................................................................6 ADVANTAGES OF OUR NOVATED LEASE ....................................................................................................7

LEASE OPTIONS ................................................................................................................................. 8
NOVATED FINANCE LEASE ............................................................................................................................8 NOVATED OPERATING LEASE.......................................................................................................................8 SALE LEASE BACK OF EXISTING VEHICLES ................................................................................................8

LEASE INCLUSIONS ........................................................................................................................... 9
VEHICLE SOURCING / PURCHASING ............................................................................................................9 VEHICLE REGISTRATION ...............................................................................................................................9 COMPREHENSIVE INSURANCE .....................................................................................................................9 VEHICLE SERVICING AND MAINTENANCE ...................................................................................................9 ROADSIDE ASSISTANCE .............................................................................................................................. 10 FUEL ............................................................................................................................................................... 10 NOVATED LEASE PROTECTION INSURANCE ............................................................................................ 11

ADDITIONAL INFORMATION ........................................................................................................... 12
CREDIT APPROVALS ....................................................................................................................................12 LEASE RENTAL PAYMENTS .........................................................................................................................12 TERMINATION OF EMPLOYMENT OPTIONS ............................................................................................... 12 WHAT HAPPENS AT THE END OF THE LEASE TERM? ..............................................................................12 EXCESS KILOMETRE CHARGES..................................................................................................................13 FAIR WEAR AND TEAR (OPERATING LEASE ONLY) ..................................................................................13 GOODS AND SERVICE TAX (GST) ...............................................................................................................14 FRINGE BENEFITS TAX (FBT) ......................................................................................................................14 METHODS OF FBT CALCULATION ...............................................................................................................15 THE STATUTORY FORMULA METHOD ........................................................................................................15 RECOGNITION BY THE AUSTRALIAN TAXATION OFFICE .........................................................................16 LUXURY CAR LEASES (GST EXCLUSIVE) ...................................................................................................16

HOW TO OBTAIN A NOVATED LEASE ........................................................................................... 18 EXPECTED PROCESS TIME FRAMES ............................................................................................ 19

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INTRODUCTION
FLEXITECH GROUP PTY LTD has provided you with the opportunity to obtain a motor vehicle of your choice, under a novated lease agreement, subject to the type of vehicle selected complying with Flexitech Group Pty Ltd‟s motor vehicle policy and satisfactory completion of the necessary credit approval processes. The cost of the vehicle will be reflected within your remuneration package via a salary sacrifice arrangement, and paid from your pre-tax salary. Subject to eligibility criteria, additional vehicles may be included within your employment package. We are delighted that FLEXITECH GROUP PTY LTD has chosen our company as an approved provider of novated leasing services. Our Novated Lease has been tailored to meet the specific requirements of both you and FLEXITECH GROUP PTY LTD, and will operate in conjunction with your normal salary packaging arrangements. As agreed with FLEXITECH GROUP PTY LTD, eligible employees / contractors who elect to finance a new vehicle with us will benefit from our competitive interest rates as well as discounted vehicle purchasing, maintenance and operating costs at „fleet prices‟. By selecting a Fully Maintained lease option, all your vehicle operating expenses can be covered including insurance, registration, servicing and maintenance, in order to provide you with lower overall motoring costs. This kit has been designed to provide you with information on Novated Leasing, to assist you with your decision on the most suitable type of vehicle lease for your needs and to facilitate the prompt processing of your application. If you require additional information at any stage regarding your lease, please contact the our Novated Lease Call Centre on: Phone: Fax: E-mail: (03) 9882 9899 (03) 9882 6454 vicaccountmgr@fleetaustralia.com.au

BACKGROUND
Fleet Australia is a fleet management specialist at the forefront of the Australian fleet leasing and fleet management industry. We provide a diverse range of services to our client base, which includes many of Australia‟s large private and public sector corporations. Our origins in Australian fleet leasing and fleet management lie in the formation of Leaseway Transportation Pty Limited in 1986, by its founders who had prior experience in the New Zealand vehicle rental business as far back as 1963. In 1988 Leaseway was appointed the exclusive Fleet Manager for CBFC, the finance company subsidiary of Commonwealth Bank of Australia. That appointment led to the establishment of a business relationship that continues today. Leaseway brought fleet management expertise to the joint venture, whereas CBFC brought financing capability for the underlying leases.

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In 1996, the Commonwealth Bank formed Fleet Care Services Pty Limited (FCS) on acquiring some of the vehicle fleet management business of TNT Australia. This business was acquired independently of the Leaseway/CBFC joint venture. In 1997, the Commonwealth Bank acquired Leaseway Transportation Pty Limited from its founding owners, and with it the principal operating company Leaseway Australia Pty Limited. In 2000, Leaseway Australia Pty Limited changed its name to Commonwealth Fleet Lease Pty Limited. The Commonwealth Bank ran the two operating businesses (ie FCS and Leaseway Australia Pty Limited) through joint management and facility sharing until 2001 when the operations of FCS were transferred into Commonwealth Fleet Lease. During our near 20-year history, we have established ourselves as one of the leading fleet leasing and fleet management providers in the Australian market. Our range of services is comprehensive, encompassing both operating leasing and finance leasing, as well as a full range of fleet management including the management of fuel, maintenance, FBT, tolls and infringements. We have earned an enviable reputation for our novated leases provided to corporate clients, and for our superior customer service in all aspects of operations. On 4 June 2004, the Commonwealth Bank sold its shareholding in the highly successful fleet management business, Commonwealth Fleet Lease, to S.G. Fleet Services Australia Pty Ltd, a subsidiary of Super Group Limited, a company listed on the Johannesburg Stock Exchange. An Australian equity consortium, including Colonial First State Private Equity, is a shareholder in S.G. Fleet Services Australia Pty Ltd. Our ultimate parent, Super Group, operates an integrated supply chain management business whose primary operating activities comprise supply chain management, fleet solutions, cross border transport, motor vehicle dealerships and the wholesale and retail of automotive parts both in South Africa and abroad. Super Group is one of the top 30 industrial companies and 53rd largest company, measured by market capitalisation, listed on the JSE Securities Exchange. At 30 September 2003, based on the six months unaudited results, Super Group‟s total assets exceeded R3.7 billion and half-year revenues exceeded R3.3 billion, employing about 8,000 people. Further information about Super Group can be found on their web sites, www.supergrp.com and www.fleetafrica.com. The June 2004 change in ownership represented an exciting phase in the history of our company and provides a new basis for enhanced fleet management solutions for clients:     Clients benefit from the intellectual property, knowledge and investment of a parent having specialist fleet management and related supply chain expertise. The Commonwealth Bank remains the principal financier for the underlying leases through its specialist asset finance subsidiary, CBFC Limited, thus continuing to offer highly competitive financing for our clients. Super Group has committed to expand its investment in Fleet Australia, including for development of state of the art systems technology. The business has retained its existing management team and all existing employees and offices, thereby providing continuity of service delivery.
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The Commonwealth Bank has retained the opportunity to refer its Institutional, Corporate and Business clients having fleet leasing and fleet management needs exclusively to us. The Commonwealth Bank has committed to the long-term management of its own “tool of trade” and novated lease vehicle fleets (2,500 vehicles) by Fleet Australia.

We are extremely excited about the future. We have an owner who is committed to expanding the product range and views fleet management as integral to its business. We intend to continue to grow while retaining our core values that focus on excelling in customer service.

WHAT IS A NOVATED MOTOR VEHICLE LEASE?
Essentially, a novated lease is an arrangement entered into by three parties - Employer / Employee Contractor / Financier - which enables the employee / contractor to lease a car of their choice within a negotiated salary packaging arrangement. Under the more specific terms of the agreement, the employee / contractor leases the vehicle from the financier under either an operating or finance lease. In turn, and with the consent of the financier, the employee / contractor novates the lease to their employer. Under this “novation”, the obligation to meet lease rentals and other conditions of the lease is transferred to the employer for the term of the novation agreement. The employer in turn usually puts into place arrangements with the employee / contractor to deduct payments from the employee / contractor gross remuneration under agreed salary sacrifice arrangements. During the course of the arrangement, the employee / contractor enjoys use of the motor vehicle as provided for in the lease. Upon advice to us that employment with the employer has ceased, the novation expires immediately, with all future obligations under the lease agreement reverting to the employee / contractor. By its very nature, novated motor vehicle leasing is a central component of personal financial planning, which varies according to the unique legal, financial and taxation profile of each person. Our comments regarding novated leasing are general in nature and should not be relied upon as a substitute for professional personal advice or as a basis for formulating personal financial planning decisions. Because of the frequency of legislative changes, we recommend that you consult an independent expert (eg: Accountant or Financial Adviser) when making these decisions. SUMMARY OF NOVATED LEASE BENEFITS          Vehicles may be financed net of GST which may reduce lease rentals (depending on Flexitech Group Pty Ltd‟s ability to claim GST Input Tax Credits). You may lease the vehicle of your choice (new or used), subject to employer approval and term and kilometre requirements. Reduced lease payments and FBT liability as vehicles are sourced by us at discounted prices. Professional control and monitoring of maintenance and repairs. Lease payments normally fixed for the term of the lease. Flexible terms in the use of the vehicle. The lease is portable if you leave Flexitech Group Pty Ltd (subject to any new employer‟s policies and some lease inclusions may require removal). We can assist in disposing of your existing owned vehicle. Access to our considerable expertise.
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Depending on individual circumstances, employees / contractors can build "notional" equity in the vehicle (finance lease) whilst also getting the tax benefits of salary packaging their motor vehicle.

ANALYSING THE FINANCIAL BENEFITS OF A LEASED MOTOR VEHICLE USING OUR NOVATED LEASE If you like the idea of a novated lease arrangement but are unsure of the financial benefits, the table overleaf may be helpful. This table incorporates all the usual expenses associated with leasing or buying a car, including FBT liability and operating costs. As you can see, the end result confirms the benefits of remuneration packaged leasing across common scenarios. General assumptions of the example overleaf:  Financing costs assume a four-year term, 35% residual value and an interest rate of 9.00% p.a.  All vehicles are assumed to travel 25,000km p.a. (11% FBT fraction).  Annual Operating Costs are assumptions only.  Tax rates for 2003/2004 are used and include a Medicare levy of 1.5%.  Financing costs exclude any statutory charges that may apply in each state.  FBT gross-up factor of 2.1292 has been used.  The novated lease finance costs are net of GST due to the input tax credit on the purchase of the vehicle. NOVATED LEASE SIMULATOR For additional information regarding Novated Leasing, Fringe Benefits Tax, Goods and Services Tax or Post Tax Employee / contractor Contributions consult our Website at www.fleetaustralia.com.au Go to “Products”, click on “Novated Leasing” for more information and then select the Novated Lease “Calculator”. This will enable you to calculate the advantages of a Novated Lease for yourself.

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ADVANTAGES OF OUR NOVATED LEASE
Employee's annual gross salary package $40,000 Private Purchase Vehicle purchase price (inc GST) Interest Rate Lease Term Financed costs per annum Operating costs Total costs $25,000 9% 48 $5,598 $5,500 $11,098 Novated Lease $25,000 9% 48 $5,598 $5,500 $11,098 $80,000 Private Purchase $35,000 9% 48 $7,837 $5,500 $13,337 Novated Lease $35,000 9% 48 $7,837 $5,500 $13,337 $100,000 Private Purchase $55,000 9% 48 $12,316 $5,500 $17,816 Novated Lease $55,000 9% 48 $12,316 $5,500 $17,816

Less GST input tax credit on vehicle costs Pre-Tax cost to salary package After tax salary required FBT payable Total pre-tax cost to salary package Equivalent cost from pre-tax income Annual pre-tax savings with Novated Lease Residual value Plus GST at 10% Total residual value $8,750 $8,750 $16,202 $11,098

$1,009 $10,089 $13,337 $2,840 $12,929 $25,898

$1,212 $12,125 $17,816 $3,976 $16,101 $34,594

$1,620 $16,196

$6,248 $22,444

$3,273 $7,955 $795 $8,750 $12,250 $12,250

$9,797 $11,136 $1,114 $12,250 $19,250 $19,250

$12,150 $17,500 $1,750 $19,250

Whole of life pre-tax finance & operating cost Pre-tax residual cost Total pre-tax cost Total savings (pre-tax) whole of life + residual Total savings (after tax) whole of life + residual

$64,806 $12,774 $77,580

$51,716 $12,774 $64,490

$103,591 $23,786 $127,377

$64,402 $23,786 $88,188

$138,375 $37,379 $175,754

$89,775 $37,379 $127,154

$13,090

$39,189

$48,600

$8,967

$20,182

$25,029

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LEASE OPTIONS
We are able to offer the following lease options to achieve maximum flexibility and convenience:   Novated Finance lease Novated Operating lease

NOVATED FINANCE LEASE In a finance lease the employee / contractor takes the risk on the residual value of the vehicle similar to that which would apply for a loan. The residual value is structured into the lease, generally at a specific percentage, according to Australian Tax Office guidelines and is payable on the date of lease expiry. A finance lease may be especially attractive to employees / contractors interested in ownership of the vehicle at the end of the lease period. It is not unusual for an employee / contractor to make an offer to buy the vehicle at the nominated value, rather than return the vehicle to the financier for sale and subsequent settlement of any variance from the nominated residual value. Generally a lessee cannot pay a lump sum deposit, such as from the proceeds of the trade-in of an existing vehicle, towards a lease as the establishment of equity, from a tax perspective, contradicts the nature of a lease. Our finance lease residual value guidelines Lease Term 12 Mths 24 Mths 36 Mths 48 Mths 60 Mths Residual Guidelines 65.00% 55.00% 45.00% 35.00% 25.00%

NOVATED OPERATING LEASE An operating lease is similar to a car rental arrangement in that we take the risk on the residual value of the vehicle at the end of the lease period. The residual value is determined by us based on our experience in the used motor vehicle market. At the end of the lease the employee / contractor simply returns the vehicle to us and is only responsible for any damage to the vehicle and any end of lease adjustments. This carries no residual value risk to the employee / contractor, however we will consider an offer to purchase the vehicle at the market value at the end of the lease. An operating lease provides the flexibility for those looking to update vehicles at regular intervals, and it is particularly attractive for those who want no residual value obligation at the end of the lease. SALE LEASE BACK OF EXISTING VEHICLES With our Novated Lease you even have the option of selling your (unencumbered) existing vehicle to us and we will lease it back to you via an operating or finance lease. However, the maximum age of the vehicle cannot exceed a stipulated age (as determined by us from time to time) at the end of the lease. [Note – because an Input Tax Credit may not be available on the purchase of your own vehicle, the tax consequences of this type of transaction may vary and not be as favourable as a similar vehicle purchased through a dealer].
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LEASE INCLUSIONS
VEHICLE SOURCING / PURCHASING Due to the volume of vehicles we purchase under finance and management arrangements, we are able to negotiate with our network of Key Dealers on the purchase price of your new vehicle and organise trade-in valuations if you have a vehicle you wish to dispose of. However, proceeds from the trade-in cannot be used to reduce the amount financed in the lease. We normally use around three dealers for each major manufacturer in each capital city to ensure quality service, availability and price. Vehicles supplied by our key dealer are delivered under strict guidelines that we specify. Accordingly, it is our recommendation that you contact us in the first instance to enable us to obtain a competitive purchase price on your behalf. By doing this we may be able to help you to avoid paying too much for your new novated lease vehicle. VEHICLE REGISTRATION Registration and Compulsory Third Party (CTP) Insurance may be included for the full term of the lease including the initial registration of the vehicle. Vehicles are registered in the employee / contractor's name and care-of our address. This ensures that all renewals are forwarded direct to us for payment before distribution to the employee / contractor. COMPREHENSIVE INSURANCE You can comprehensively insure your vehicle in your name through a third party insurer that has a special policy for our novated fleet. This way the insurance premiums can be included within the monthly lease rental and paid for from pre-tax salary. A separate document is available which specifically outlines the benefits of this comprehensive insurance policy. When arranging this insurance, we act as an authorised representative of insurance broker, Marsh Pty Limited. It is not compulsory to accept this offer to include the insurance premium within the lease rental. However all vehicles must be comprehensively insured, with proof of insurance to be provided before vehicle delivery. VEHICLE SERVICING AND MAINTENANCE It is the driver‟s responsibility, and in their best interest, to ensure the vehicle is serviced and maintained at the correct intervals, throughout the term of the lease agreement. Each vehicle under a managed maintenance lease is provided with a Driver's Handbook outlining procedures when booking the vehicle in for service at the nearest dealer service outlet. The vehicle is simply booked in for service in the name of Fleet Australia. All service/maintenance work to be completed is identified, and the service centre contacts our Maintenance Control area for the necessary authorisation. Invoices from the service centre are then directed to us for payment. We will be responsible for the cost of all maintenance necessary for the proper and efficient operation of the vehicle (but not refurbishment or repairs occasioned by neglect or abusive operation of the vehicle).
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Under a Fully Maintained lease, all manufacturer's scheduled servicing, normal wear and tear, mechanical repairs including batteries and a specified number of replacement tyres are included within the lease rentals with costs incurred being underwritten by us. The major benefits of selecting a Fully Maintained Lease include:  Repairs and maintenance costs are included within monthly lease repayments, as a fixed monthly fee usually paid from pre-tax salary.  Costs are underwritten, (guaranteed), by us. No risks of over spending due to high cost repairs.  Prevents cost “blow-outs” due to inflation and price increases.  Ensures GST input tax credits are captured. Input Tax Credits will be clearly identified and claimed.  Actual repair costs are invoiced at Trade pricing structures, which reduces overall vehicle operating costs.  All repairs are authorised by qualified Maintenance Controllers.  Provides the ability of a fully transportable novated lease, including repairs and maintenance.  Eliminates the need for employees / contractors having to physically pay for operating costs and then seek reimbursement for costs incurred. We will structure a Fully Maintained Operating or Finance Lease for a maximum lease period of five years. ROADSIDE ASSISTANCE Membership of Fleet Australia Roadside Assist is provided if the vehicle manufacturer does not provide a similar cover eg. Holden have a roadside assistance program referred to as Holdenwise. Our roadside assistance program is exclusive to our customers, ensuring that your vehicle receives the 24-hour/7 days roadside service with minimum delay. FUEL Fleet Australia/Caltex Fuel Card We have an arrangement with Caltex Australia to offer our customers a Caltex StarCard to purchase fuel for their novated lease vehicle. Fuel purchased on the co-branded StarCard will be provided at the pump price or the discounted “card price”, whichever is the lowest. The Caltex card price is a benchmarked daily price that enables Caltex to offer a rebate to their valuable commercial customers. The card price is calculated daily, based on the company‟s wholesale price for fuel supplied to service stations and market movements in pump price across any card pricing territory. Generally there is a Caltex card price for each capital city and its surrounding major regional towns. For example, Sydney, Wollongong and Newcastle have the same card price. The StarCard system will automatically compare the difference between your card price discounted rate and the prevailing pump price, and in the unlikely event the pump price is lower than the card price, you will be charged the lower of the two prices. The daily Caltex card price can be obtained by calling StarCard on 1800 819 325 or by visiting the Caltex Australia website at www.caltex.com.au. The Caltex StarCard will provide you access to the largest fuel provider network nationally, with 2,415 sites, compared with the next largest network with only 1,611 sites (source, Caltex Australia, current November 03).

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It should be noted that a standard transaction fee would also apply. Subject to agreement between us and Flexitech Group Pty Ltd, a fuel provision may be established and included within the lease rentals based upon estimated fuel consumption for the vehicle and the kilometres to be travelled under the lease. An annual reconciliation will be conducted on the provision versus actual fuel used for the vehicle, with any surpluses/shortfalls being to the account of the employer for adjustment to the employee / contractor‟s salary. NOVATED LEASE PROTECTION INSURANCE An insurance premium payable to an external insurer can be included within the monthly lease rentals to cover you in the event that you are involuntarily made redundant from your position. If this should occur you have the option to return the vehicle, with the lease break costs up to specified maxima being covered, or retain the vehicle for a period of up to four months, in order to find alternate employment, and have a maximum of three lease rentals paid for you. If you are still unable to locate alternate employment after four months, you may return the vehicle and have the lease break costs, up to specified maxima, paid. This insurance policy also covers the lease break costs to specified maxima in the event of death or total and permanent disablement. When arranging this insurance, we act as an authorised representative of insurance broker, Marsh Pty Limited. Further details regarding this offer can be obtained from the policy document.

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ADDITIONAL INFORMATION
CREDIT APPROVALS     Approval is subject to our standard terms and conditions. Applicants are assessed on their personal financial position. Decisions are normally available within 48 hours of receipt of an application. Fees and charges may apply.

LEASE RENTAL PAYMENTS Your first monthly lease rental will be billed to Flexitech Group Pty Ltd at the time of delivery of your new vehicle and will be due for payment immediately. Each subsequent lease rental will then be billed th at the commencement of each new month and will be due for payment by the 15 of that month. TERMINATION OF EMPLOYMENT OPTIONS Upon our receiving advice that an employee / contractor has ceased their employment, the novation is cancelled and all future obligations, including lease payments become the responsibility of the employee / contractor. Should this situation occur the following options are available:     The lease can be re-novated to a new employer (subject to the consent of that employer and ourselves) by execution of a new novation agreement. You may wish to make an offer to purchase the vehicle and terminate the lease. A purchase price can be obtained by contacting us. The vehicle can be returned to us. You will be liable for any shortfall between the lease payout and the market price of the vehicle. The lease may be restructured to reflect the vehicle's new usage patterns.

Fees may apply for the above. Please note, should a fuel provision be applicable to your lease, the fuel arrangement will be cancelled upon cessation of employment. WHAT HAPPENS AT THE END OF THE LEASE TERM? Under a Novated Finance Lease You indemnify us for the agreed residual value. You have no right under the lease contract to purchase the vehicle at the lease end. However, in practice, we will consider an offer from you to purchase the vehicle for the residual value. Under a Novated Operating Lease You simply return the vehicle to us, without obligation for the residual value but subject to payment for any excess kilometre charge or unfair wear and tear damage. While you do not have a right to purchase the vehicle, we will consider an offer to purchase the vehicle at the current market value as determined by us.

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EXCESS KILOMETRE CHARGES A vehicle‟s contracted kilometres is one of the factors used to determine the total lease rental to be charged as distance/usage affects both the cost of maintenance and the “second hand‟ value of the vehicle. If your vehicle travels in excess of the lease kilometres you may be liable for an excess kilometre charge at the end of the lease period. This excess kilometre charge will simply represent the decreased value of the vehicle and/or the additional maintenance required as a result of the vehicle travelling more kilometres than originally anticipated. The excess kilometre rate is defined in the lease agreement. If, after a reasonable evaluation period, it appears as though your vehicle is likely to either exceed or under achieve the anticipated lease kilometres, it is possible to restructure your lease to more correctly reflect the revised usage patterns (subject to a restructure fee). It should be noted however that any under achievement of anticipated kilometres might also affect the FBT liability in respect of your vehicle. FAIR WEAR AND TEAR (OPERATING LEASE ONLY) When returning a vehicle to us at the end of an operating lease, you will be liable for any damage to the vehicle through neglect or abuse. The only exceptions to this will be for minor car park dents, stone chips or scratches that have a total estimated repair cost of less than $350. These will be considered as being fair wear and tear. Broken or missing parts such as windscreens, mirrors, aerials, wheel covers, spare wheels and tools are considered as being unfair wear and tear regardless of the values involved. The lease contract defines the condition in which vehicles should be returned and what constitutes "Fair Wear and Tear". We promote the Australian Fleet Lessors Association (AFLA) „Fair Wear and Tear‟ Guide as a reference document to aid in the understanding of this important area. Copy of this document is available on our website (www.fleetaustralia.com.au).

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TAXATION ISSUES
GOODS AND SERVICE TAX (GST) Lease rentals and lease related charges, will generally be taxable. This means that the financier will charge GST (10%) on normal lease rentals and other fees and charges. GST will also be payable on the residual value and any „payout‟ of the lease agreement. As ownership of the leased vehicle rests with the financier, the financier claims an input tax credit on the vehicle purchased. This means that the lease rentals and residual value are based on the cost price of the vehicle net of GST. FRINGE BENEFITS TAX (FBT) The employer-provided motor vehicle is one of the few salary package items that continue to attract concessional taxation treatment. FBT is a Federal Government tax imposed on employers on the value of certain fringe benefits that have been provided to employees / contractors (or to their associates) in respect of their employment. The FBT year runs from 1 April to the following 31 March. Under the FBT „gross up‟ rule, the value of the benefit is increased so that it is equivalent to the after tax salary sacrificed amount of the benefit plus FBT at the marginal rate of tax. This is intended to neutralise the tax benefit of receiving either a salary or salary benefit. However, motor vehicles remain an attractive component of a remuneration package because they are concessionally taxed for FBT purposes. The introduction of GST has also impacted the FBT relating to motor vehicles. The intention of the Federal Government is for the impost of GST to be borne by the consumer, which in the case of a novated lease is the employee / contractor. However, the GST liability of employers can impact upon the cost of motor vehicles (and other salary package items) to the employee / contractor. Accordingly, the FBT regime introduces two FBT gross-up rates with the intention of delivering tax neutrality that results from the varying GST liability of employers. Where an employer is not able to claim a GST input tax credit for the costs associated with the vehicle, the original pre-GST FBT gross-up rate will be applied – 1.9417 (type 2 benefit). If the employer is entitled to a GST input tax credit, it will effectively reduce the cost of the benefit by the amount of the GST input tax credit, thereby reducing the tax revenue to the Government. Accordingly, to ensure the Government receives its intended revenue, a higher FBT gross-up rate of 2.1292 will apply (type 1 benefit). The 2.1292 FBT gross-up rate only applies to the calculation of an employer‟s FBT liability. Employers will continue to use the 1.9417 gross-up rate when determining an employee / contractor‟s „reportable fringe benefit amount‟ disclosed on their payment summary. Certain employers such as Public Benevolent Institutions are exempt or entitled to claim a rebate on their FBT liability, lowering the cost of the benefit to the employee / contractor. The FBT introduces a cap on the concessional treatment. Generally, a cap of $30,000 on the grossed-up taxable value applies, although a lower threshold of $17,000 exists for certain employees / contractors within the public hospital system and for non-profit hospitals. However, not all items are included when determining whether an employee / contractor‟s threshold is exceeded.

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METHODS OF FBT CALCULATION Once you have established the FBT gross-up rate to the employer and its employees / contractors, there are two methods available for calculating FBT for motor vehicles:  statutory formula method; or  operating cost method. The statutory formula method makes no distinction between private and business use. It is therefore the more appropriate method to use where a vehicle has high private use content. This is especially the case where the employee / contractor‟s car never needs to be used for business purposes, and still has a high kilometre use overall. THE STATUTORY FORMULA METHOD The statutory formula values employer-provided cars for FBT purposes at a percentage of their initial cost, inclusive of GST but excluding registration and Stamp Duty. The actual percentages for discounting the car‟s value vary according to the total kilometres travelled each year. For example, a vehicle valued at say $30,000, travelling 25,000 kilometres a year, has an FBT value of $3,300 ($30,000 x 11% = $3,300). FBT will be calculated and payable on the grossed-up motor vehicle value of $7,026.36 (3,300 x 2.1292). Therefore: Taxable FBT value = $3,300 FBT calculation = $7,026.36 ($3,300 x 2.1292) FBT payable = $3,407.78 ($7,026.36 x 48.5%) An amount of $6,407.61 ($3,300 x 1.9417) will also be included on the employee / contractor‟s payment summary as a reportable fringe benefit. Statutory formula method – applicable discount percentages (based on kilometres travelled) More than 40,000km 7% 25,000 to 40,000km 11% 15,000 to 24,999km 20% Less than 15,000 km 26%

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All operating costs such as fuel, insurance, registration and servicing are not liable for FBT. However, it is also worth noting that any after tax salary payments made by the employee / contractor towards the cost of the vehicle will reduce the FBT liability. For those employees / contractors or their families that travel long distances, the statutory method of calculating FBT is particularly attractive. RECOGNITION BY THE AUSTRALIAN TAXATION OFFICE For some time taxation ruling IT 2509 has set out the income tax and fringe benefits tax implications for novated motor vehicle leases. The ruling has been relied upon by many employers, including governments and financial institutions, for a number of years. Although taxation rulings (particularly TR1999/15) have subsequently been issued which narrow the range of arrangements qualifying for concessional tax treatment as novated leases, our Novated Lease documentation has been approved by the Australian Taxation Office (ATO). Our Novated Lease arrangement generally constitutes „split-full novations‟ for the purpose of TR1999/15, which ensures that the motor vehicle is deemed to be „held‟ by the employer for FBT purposes, while the vehicle is perceived to be „owned‟ by the employee / contractor. The lease payments are not intended to represent income in the employee / contractor‟s hands nor is the employee / contractor entitled to claim them as a tax deduction. The employer will normally be entitled to an income tax deduction for the lease rentals and other costs such as fuel, registration, insurance and servicing. Where the employer is registered for GST purposes they should be able to claim an input tax credit on the GST paid on the lease payments. However, some employers because of the nature of their business will not be able to claim an input tax credit (eg. Life Insurance Company). LUXURY CAR LEASES (GST EXCLUSIVE) The luxury car lease rules apply where the cost of the vehicle is greater than the threshold set by the ATO. For the year ending 30 June 2005, the threshold will be $57,009. For tax purposes, luxury car leases are treated as a sale to the employer by the financier with a corresponding loan provided by us. The employer is entitled to depreciation (within limits set by the ATO) and interest deductions during the lease term. Upon termination, expiry, extension or renewal of the lease, a tax liability equal to a balancing charge and a notional loan adjustment may arise. These amounts may increase or decrease taxable income depending upon the facts of the particular case. These do not arise where the employee / contractor purchases the vehicle. The balancing charge is the difference between the „adjusted consideration‟ on disposal and the tax written down value of the vehicle. The „adjusted consideration‟ is simply a proportion of the residual value, calculated in accordance with the following formula: Residual Value x Tax Depreciation Limit/Original Cost of Car The notional loan adjustment reflects the fact that the termination amount may differ from the residual value used to calculate the accrued amounts. Some employers may decide to include this amount in the employee / contractor‟s package. However, as the amount is not known until the end of the lease,
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it may prove difficult or require mutually acceptable assumptions. This adjustment may produce an allowable deduction for the employer in certain circumstances, for instance, where the market value is greater than the residual value. The amount of the adjustment is the difference between (A) the sum of total lease payments and the market value of the car (at termination) and (B) the sum of the notional loan amount (original cost of the car) and notional interest charges on the lease. Where a lease is renewed or extended, the vehicle‟s residual value is calculated. The vehicle is then deemed to be sold and reacquired for this value. The notional depreciation and interest charges still apply and future tax depreciation is worked out on the „adjusted consideration‟ mentioned earlier. Furthermore, the notional loan adjustment, discussed above, is included in the taxable income of the employer and the financier. The luxury car lease rules are complicated and you should seek your own advice in relation to the tax implications of such leases.

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HOW TO OBTAIN A NOVATED LEASE
What do I need to do? 1. Complete the Novated Lease Quotation Request form. If you are unsure of the type of vehicle or lease details you require, please contact us on (03) 9882 9899, for assistance. Forward the completed Quotation Request form to us on either: FAX (03) 9882 6454, or E-MAIL on vicaccountmgr@fleetaustralia.com.au We will provide you with a Lease Quotation and in some circumstances an estimation of total salary sacrifice for the vehicle and lease that you have selected. When you are ready to accept a lease quotation, fax the following to us on (03) 9882 6454:     Completed and signed Quote Acceptance - the lower section of the lease Quotation Statement of Personal Financial Position Supporting documentation eg council rates notice & current home loan statement (for each property if applicable) Letter of Employment – this should confirm your commencement date and current salary and be signed by your Human Resources (HR) department.

2.

3.

4.

5.

After credit has been approved, the Lease Agreements and Novation Agreements will be drawn up and forwarded to you for execution. A Novated Lease Protection Insurance (NLPI) application form will also be forwarded to you for completion, if applicable. All three copies of the Lease documents are to be executed by you and then forwarded to your HR department for execution, together with the NLPI application form, if applicable. For second-hand vehicles, also provide a copy of registration papers and a tax invoice from the dealer/vendor for the amount in question.

6.

7.

Your HR department will execute the lease documents as required and return them to us on your behalf. If Comprehensive Insurance has not been placed with the third party insurer that we can arrange, then you must submit to us proof of insurance cover for your motor vehicle, prior to delivery. Please note that Comprehensive Insurance on your novated lease vehicle is compulsory. The vehicle is ordered and then delivered to you by the nominated motor vehicle dealer. We will pay the dealer directly for the vehicle. A copy of the completed lease documents are then returned to you for your records together with a Vehicle Schedule, after delivery of your motor vehicle.

8.

9. 10. 11.

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EXPECTED PROCESS TIME FRAMES
Where possible, we will endeavour to provide information and documentation within the following time frames. Please note that the majority of functions performed by us are reliant upon information and documentation being provided by various outside sources beforehand.          Lease Quotations provided for new locally manufactured passenger vehicles within two working days of receipt of lease quotation requests. Lease Quotations provided for all other new vehicles within three working days of receipt of lease quotation requests. Lease Quotations provided for all second hand vehicles within four working days of receipt of lease quotation requests. Credit applications to be processed within two working days of receipt of application. Lease documents drawn up and dispatched to employee / contractor within two working days of receipt of credit application. Vehicle Orders to be placed with supplying Dealer within two working days of receipt of signed lease agreements. Confirmation of Salary Sacrifice to be provided within five working days after the receipt of the Vehicle Invoice and Registration papers from the selling Dealer. Fuel Cards ordered within one working day of receipt of registration papers from selling Dealer. Fuel Cards dispatched to employee / contractor within one working day of receipt by us.

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Novated Lease Quotation Request New Vehicles
FLEXITECH GROUP PTY LTD
FAX TO: ATTN: DATE: 03 9882 6454 or email to vicaccountmgr@fleetaustralia.com.au CUSTOMER SERVICE

PERSONAL DETAILS Full Name Business Telephone Mobile Telephone Fax E-Mail Are You Entitled to an Employer Provided Vehicle? Employee / Contractor Number VEHICLE DETAILS Make Model Body Type Engine Type
Sedan/Wagon etc 4/6/8 cylinder

B( ) M ( ) Yes No

Vehicle 1

Vehicle 2

Engine Capacity ltr Transmission Auto/Manual Accessories/Options
eg. Air Conditioning, Tow Bar,

Auto Manual

Auto Manual

LEASE DETAILS Lease Type Lease Term/Klms Location Vehicle Accident in Last 2 years Dealer Quote Obtained Basis of Quote (Fully Maintained Lease Inclusions)

Finance Months: State: Yes Yes (attach copy) Fully Maintained Maintenance Roadside Service Comp. Insurance Fuel Provision
20

Operating Annual Klms: Garage Postcode: No No Future Registration Replacement Tyres Redundancy Cover

Y / N

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Novated Lease Quotation Request Second Hand Vehicles
FLEXITECH GROUP PTY LTD
FAX TO: ATTN: DATE: 03 9882 6454 or email to vicaccountmgr@fleetaustralia.com.au CUSTOMER SERVICE

PERSONAL DETAILS Full Name Business Telephone Mobile Telephone Fax or E-Mail Are You Entitled to an Employer Provided Vehicle? Employee / Contractor Number

B( ) M ( ) Yes No

EHICLE DETAILS
Make Model & Rego Number Body Type (Sedan/Wagon) Engine Capacity & Type (eg. 3.8 ltr petrol) Transmission (Auto/Manual) Color Accessories and options (e.g. air conditioning, tow bar etc) Purchase via: Dealer Private Financier Proposed Lease Start Date Build Date (month & year) Next Rego Due Date (Date, Month & Year) State of Registration Odometer Reading Odometer reading Date CFL Purchase Price (Incl GST) GST Amount $

Is vehicle currently registered in driver’s name. Does Purchase Price include Registration Transfer Costs? Finance Months: State: Yes Yes (attach copy) Fully Maintained Maintenance Roadside Service Comp. Insurance Fuel Provision
21

LEASE DETAILS Lease Type Lease Term/Klms Location Vehicle Accident in Last 2 years Dealer Quote Obtained Basis of Quote (Fully Maintained Lease Inclusions)

Operating Annual Klms: Garage Postcode: No No Future Registration Replacement Tyres Redundancy Cover

Y / N

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Statement of Personal Financial Position
This application is to be accurately and fully completed by the applicant

Vehicle Description PERSONAL DETAILS
Given Names Address Occupation Marital Status Bank/Branch Surname

Quote Number

Date of Birth How long at this address? Ph:

How long in current employment Number of Dependents

STATEMENT OF ASSETS AND LIABILITIES Liabilities
Owing on house to Owing on other property to Owing to bank Credit Cards (provide details) Hire Purchase with Other (provide details) TOTAL LIABILITIES

$

Assets
House / Deposit on house at Other property at Aggregate balance of all bank accounts Other investments (provide details) Motor Vehicle Registration Number Furniture Life Policy (Estimated surrender value) Other (provide details) TOTAL ASSETS (LESS) TOTAL LIABILITIES SURPLUS / DEFICIT

$

I am currently acting as Guarantor for financial liabilities totalling $ For the following person(s):

MONTHLY COMMITMENTS AND INCOME (NEXT 12 MONTHS)

Commitments
Credit Card / Store Account Mortgage / Rental Payments Taxes (excluding P.A.Y.E) Rates Insurance (car, house, life etc) Superannuation Hire Purchase / Lease payments Other Loans

$

Income
Salary (after tax) Other wages & drawings Rental Property Income Family Allowance / Other pensions Other Income (provide details)

$

TOTAL ANTICIPATED INCOME (LESS) TOTAL COMMITMENTS TOTAL COMMITMENTS SURPLUS / DEFICIT I declare, that the information given is in all respects a full and true statement of my present financial position, and my anticipated income and outgoings for the next twelve months. I acknowledge that:  Personal information is collected for the purpose of assessing my application for credit, and that failure to provide sufficient information may mean my application cannot proceed;  Personal information may be disclosed to credit providers, who may in turn disclose the personal information to its related entities for prudential and administrative purposes;  Credit checks may be carried out and personal information disclosed to a credit reporting agency, and they may access their personal information at any time. Signature_______________________________________

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Company Authorisation Example / Draft Company Letterhead
Fleet Australia Pty Ltd PO Box 3080 Auburn VIC 3123

Date

Novated Lease for XXXXX Manager
We certify that «FirstName» «Surname» is employed by «Company» in the capacity of «Title» and has been employed by «Company» since remuneration is $__________. . Their current gross annual

A specimen signature of

appears below.

. Specimen Signature

. Witness Signature

. Full name and Position of Witness

. Signed For And On Behalf Of XXXX

___________________________ (Signatory)
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For more information visit our website at: www.fleetaustralia.com.au
Or contact our Customer Service Centre on:
EMAIL: vicaccountmgr@fleetaustralia.com.au PHONE: 03 9882 9899 FAX: 03 9882 6454

Fleet Australia Pty Limited ABN 15 003 429 356 reserves the right to require leasing arrangements to be made with CBFC Leasing Pty Limited ABN 89 008 520 965, or any subsidiary or Commonwealth Bank Group entity, or an alternative financier. The information provided in this Information Kit is copyright to Fleet Australia Pty Limited unless otherwise stated. The views expressed are not necessarily those of Fleet Australia Pty Limited and the company makes no claim to their accuracy. Information in this Kit may contain technical inaccuracies or typographical errors. Information may be changed or updated without notice. Fleet Australia Pty Limited accepts no responsibility for any loss occasioned to any person acting or refraining from action as a result of material published in this Kit. The information on taxation is of a general nature only and is based on the continuation of present taxation laws, rulings and their interpretation. As individual circumstances differ, you should seek assistance from your taxation advisor.
FAU958

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