If the current pump prices are hurting your hip pocket, there’s a way to save bucket loads of money every time you fill the tank. How? Salary packaging a car via a novated lease.
Let’s explain a novated lease first. It’s an agreement between you, your employer and a finance company to lease car (new or used) and deduct the costs from your pre-tax salary. You pay less tax because it reduces your taxable income and your employee claims the GST on all the expenses which makes them 10% cheaper. Overall, you save money compared to paying cash for a car or using a mother method of finance.
So when it comes to buying petrol or diesel, you can take 10% off the pump price. So $2.20 become $2 per litre; or a $12 saving when you fill a 60 litre tank.
Matt Newman, Head of Novated and Consumer at SG Fleet, explains that novated leasing offers a savvy way to reduce the cost of motoring, including fuel expenses.
“Novated leasing customers pay 10% less for fuel and other running costs by saving the GST,” says Newman.
The other way you save money with a novated lease is a little more complicated. It’s the salary sacrifice component where you pay for your car running costs (fuel, maintenance, tolls, rego servicing, tyres etc) before you pay tax.
Simon Haidar, Group Executive – Sales and Product Services at McMillan Shakespeare Group, told Fleet Auto News that, “Fuel prices are obviously the latest challenge for drivers, with any savings that can be found like gold. The fact that fuel can be paid for using some pre-tax dollars is one of the reasons why the benefits of novated leasing become even more appealing in the current environment. By potentially reducing a driver’s taxable income, a novated lease could help them pay less overall for a car.”
The total savings are different for everyone depending on their income levels, however if you’re average tax rate is 30% and you add it to the 10% GST savings, $2.20 per litre at the pump for ULP becomes $1.32 per litre (a 40% discount) with a novated lease.
Frank Agostino, General Manager at Fleet Network, believes this is a big selling point once people understand the benefits.
“A Novated Lease allows you to use your pre-tax income to pay for fuel whilst minimising the GST you pay, effectively saving up to 40% at the bowser. No more waiting for the ‘cheap fuel’ day or driving around to find the cheapest station. With a Novated Lease, you pay less, stress less, and enjoy all the savings,” says Agostino.
