When a motor vehicle is used 100% for private purposes there is normally no tax deduction available on the expenditure. With this strategy an employee can generate annual tax savings of $2,500 – $3,000 pa by salary packaging their private motor vehicle with their employer.
The tax savings result from the motor vehicle tax concessions available under the Fringe Benefits Tax Act and also the GST savings on the motor vehicle purchase cost and operating expenses. The upfront GST savings on purchasing a $40,000 motor vehicle, for example, are $3,636.
This strategy involves the employer owning or leasing the motor vehicle and providing the motor vehicle to the employee as a fringe benefit (as part of the employee’s overall salary package). The employer ensures the employee’s overall salary package doesn’t increase by reducing the employee’s cash salary paid to cover the motor vehicle and fringe benefits tax costs. As such, it should also be used to salary package a spouse or children’s motor vehicles if they are used for private purposes only.
Implementation Process and Costs
- Employer owns or leases the motor vehicle and provides the motor vehicle to the employee as a fringe benefit as part of the employee’s overall salary package.
- Employer pays motor vehicle operating expenses.
- Employer claims back GST on vehicle cost and expenses.
- The employer ensures the employee’s overall salary package doesn’t increase by reducing the employee’s cash salary paid to cover the motor vehicle and fringe benefits tax costs.
If you’re not sure what to do in your circumstances and would like to discuss your particular situation with our accountant, please email Tradies Advantage or call us direct on (07) 3333 2415.
Please Note: Many of the comments in this article are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.
Copyright © 2018 Robert Bauman.